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Enhanced annuities and the impact of individual underwriting on an insurer’s profit situation. (English) Zbl 1140.91420

Summary: We analyze the effect of enhanced annuities on an insurer engaging in individual underwriting. We use a frailty model for heterogeneity of the insured population and model individual underwriting by a random variable that positively correlates with the corresponding frailty factor. For a given annuity portfolio, we analyze the effect of the quality of the underwriting on the insurer’s profit/loss situation and the impact of adverse selection effects.

MSC:

91B30 Risk theory, insurance (MSC2010)
91B28 Finance etc. (MSC2000)
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