Longevity risk hedging and annuity pricing for re-insurance: A case study of Social Security and National Insurance Trust (SSNIT)

Thumbnail Image
April, 2016
Journal Title
Journal ISSN
Volume Title
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.
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.