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European Actuarial Journal

, Volume 5, Issue 1, pp 11–28 | Cite as

Analyzing the effect of low interest rates on the surplus participation of life insurance policies with different annual interest rate guarantees

  • Peter HieberEmail author
  • Ralf Korn
  • Matthias Scherer
Original Research Paper

Abstract

We analyze the effects of a prevailing low interest rates regime on investment decisions of insurance companies and on the risk/return profile of participating life insurance policies with different contractually guaranteed minimum annual return. Our analysis is based on German legislation and a stylized insurance company with two cohorts of insured persons having different minimal return guarantees. Our findings shed some light on the non-trivial interrelation between profit distribution, minimum guarantees, and resulting profitability for the different cohorts. Moreover, we investigate the complex role of the risk reserve that allows insurance companies to redistribute profits in time and, less obviously, also between the cohorts.

Keywords

Life insurance policy Minimal return guarantees Surplus distribution 

Notes

Acknowledgments

We want to thank Alexander Kling, Jochen Ruß, Ralf Werner, and the participants of the 2014 research seminar TU München/University Duisburg-Essen for fruitful discussions on the topic.

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Copyright information

© DAV / DGVFM 2015

Authors and Affiliations

  1. 1.Institut für VersicherungswissenschaftenUniversität UlmUlmGermany
  2. 2.Fachbereich MathematikTechnische Universität KaiserslauternKaiserslauternGermany
  3. 3.Fraunhofer ITWMAbteilung FinanzmathematikKaiserslauternGermany
  4. 4.Lehrstuhl für Finanzmathematik (M13)Technische Universität MünchenGarching-HochbrückGermany

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