Longevity risk hedging and annuity pricing for re-insurance: A case study of Social Security and National Insurance Trust (SSNIT)
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Date
April, 2016
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Abstract
Predicting mortality trend and hedging of longevity risk in recent times has gained
attention at a period when life expectancies are increasing unexpectedly. Due to
advancement in technology, hygienic and medical practices, life insurance companies may
achieve more profit because their liabilities will reduce since death benefit payments are
paid whilst the annuity insurance scheme such as pensions may incur losses because of
longevity improvement. The study seeks to investigate if there exists longevity risk pose
to SSNIT and how they can reinsure the pensioners after the guarantee period of 15 years.
Data collected from SSNIT covered the period 1991 – 2013 and Lee Carter model was used
to predict future male mortality trend of the study. The study proposed that, SSNIT can
insure the pensioners by acquiring life annuities from private life companies and individual
longevity risk can be hedged through acquiring a life annuity from private life insurance
companies since using Lee Carter model has proved that there is improvement in longevity.
Description
A thesis submitted to The Department of Mathematics, Kwame Nkrumah University of Science and Technology in partial fufillment of the requirement for the degree of Msc. Actuarial Science.