Does Surplus Participation Reflect Market Discipline? An Analysis of the German Life Insurance Market

Eling, Martin; Kiesenbauer, Dieter

doi:10.1007/s10693-011-0113-z

Cited by 18 publications

(16 citation statements)

References 46 publications

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“…Eling and Kiesenbauer (2012) and Cottin et al (2007) focus on the relationship between lapse rates and surplus participation only. This paper studies empirically lapse rates in the German market by addressing the following three research questions: (1) What are the main determinants of lapse in the German life insurance market?…”

Section: Related Literature and Research Questionmentioning

confidence: 99%

“…As typically done in empirical research on insurance companies, the potential bias introduced by small companies has to be taken into account (see Epermanis and Harrington 2006;Eling and Kiesenbauer 2012). Small contract numbers are a sign of either new entrants or niche players, which are not directly comparable to other market participants.…”

Section: Lapse Datamentioning

confidence: 99%

“…The consideration of age, legal form, and company size is borrowed from Epermanis and Harrington (2006) or Eling and Schmit (2012). Eling and Kiesenbauer (2012) consider the participation rate spread, which constitutes an assessment of the internal rate of return of life insurance products. Information on distribution channels is rarely found in empirical literature, probably because of problems with data availability.…”

Section: Company-specific Explanatory Variablesmentioning

confidence: 99%

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Main Determinants of Lapse in the German Life Insurance Industry

Kiesenbauer

2012

North American Actuarial Journal

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This paper studies the determinants of lapse in the German life insurance industry. Logistic regression models are employed using data on macroeconomic indicators and company characteristics of 133 German life insurers from 1997 to 2009. Five different product categories are considered (endowment, annuity, term life, group, and other). The findings indicate that the main lapse determinants are very similar across all product categories, except that the direction of impact is reversed for the product category ''other,'' which consists almost exclusively of unitlinked business. In particular, the interest rate and emergency fund hypotheses are supported only for unit-linked business, while these hypotheses do not hold for the remaining product categories. Overall, the analysis provides an understanding of lapse dynamics related to economic indicators and company characteristics. The derived models can be used to predict lapse rates for the different product categories considered. The results are important for insurance company managers, regulators, and life insurance customers.

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Section: Related Literature and Research Questionmentioning

confidence: 99%

Section: Lapse Datamentioning

confidence: 99%

Section: Company-specific Explanatory Variablesmentioning

confidence: 99%

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Main Determinants of Lapse in the German Life Insurance Industry

Kiesenbauer

2012

North American Actuarial Journal

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“…While this might be more complex for regulators and customers, a positive aspect is that it sets economic incentives in the sense that good managers are rewarded, whereas bad managers are sanctioned. Notable in this context is that in other fields of insurance regulation there is a trend from more rules-based 37 Eling and Kiesenbauer (2012). 38 One possibility for taking the expected future yield development into account is described in Pro¨hl (2012) and involves connecting the technical rate and the Solvency II ultimate forward rate.…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 99%

Maximum Technical Interest Rates in Life Insurance in Europe and the United States: An Overview and Comparison

Eling

Holder²

2012

Geneva Pap Risk Insur Issues Pract

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We compare the regulatory environment for the maximum technical interest rate of life insurance contracts in four European countries and the United States. In Germany, Austria and Switzerland, the maximum rate is driven by a long-term rolling average of government bond yields and is adjusted by the regulator. In the U.S., corporate bond yields are used and the regulator is not directly involved in setting the maximum rate. The regime implemented in the United Kingdom is unique: instead of a rules-based "one-size-fits-all" approach, the maximum rate is determined by a company-specific principle-based method. We provide a comparative analysis of the different systems and conduct a numerical analysis to investigate how the maximum rate will develop under predefined interest rate scenarios. The discussion is highly relevant in light of Solvency II, a regime that may fundamentally change regulation of the maximum technical interest rate.

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“…We provide here just a short overview of the main papers in that area and refer interested readers to [14] for a broad classification of lapse rate models. According to their work, one can differentiate between three major groups of papers depending on the assumptions made on the policyholder rationality.…”

Section: Introductionmentioning

confidence: 99%

Incorporation of Stochastic Policyholder Behavior in Analytical Pricing of GMABs and GMDBs

Escobar

Krayzler²,

Ramsauer

et al. 2016

Risks

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Abstract:Variable annuities represent certain unit-linked life insurance products offering different types of protection commonly referred to as guaranteed minimum benefits (GMXBs). They are designed for the increasing demand of the customers for private pension provision. In this paper we analytically price variable annuities with guaranteed minimum repayments at maturity and in case of the insured's death. If the contract is prematurely surrendered, the policyholder is entitled to the current value of the fund account reduced by the prevailing surrender fee. The financial market and the mortality model are affine linear. For the surrender model, a Cox process is deployed whose intensity is given by a deterministic function (s-curve) with stochastic inputs from the financial market. So, the policyholders' surrender behavior depends on the performance of the financial market and is stochastic. The presented pricing scheme incorporates the stochastic surrender behavior of the policyholders and is only based on suitable closed-form approximations.

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Does Surplus Participation Reflect Market Discipline? An Analysis of the German Life Insurance Market

Cited by 18 publications

References 46 publications

Main Determinants of Lapse in the German Life Insurance Industry

Main Determinants of Lapse in the German Life Insurance Industry

Maximum Technical Interest Rates in Life Insurance in Europe and the United States: An Overview and Comparison

Incorporation of Stochastic Policyholder Behavior in Analytical Pricing of GMABs and GMDBs

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