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Title:Stochastic mortality, macroeconomic risks, and life insurer solvency PDF Logo
Authors:Hanewald, Katja
Post, Thomas
Gründl, Helmut
Issue Date:2009
Series/Report no.:SFB 649 discussion paper 2009,015
Abstract:Motivated by a recent demographic study establishing a link between macroeconomic fluctuations and the mortality index kt in the Lee-Carter model, we assess the impact of macroeconomic fluctuations on the solvency of a life insurance company. Liabilities in our stochastic simulation framework are driven by a GDP-linked variant of the Lee-Carter mortality model. Furthermore, interest rates and stock prices are allowed to react to changes in GDP, which itself is modeled as a stochastic process. Our results show that insolvency probabilities are significantly higher when the reaction of mortality rates to changes in GDP is incorporated.
Subjects:Life insurance
asset-liability management
stochastic mortality
Lee-Carter model
business cycle
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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