Siegelin, Ivonne

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2012 - 20142
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  • Publication
    Accounting and Actuarial Smoothing of Retirement Payouts in Participating Life Annuities
    (2014-02-01) Maurer, Raimond; Mitchell, Olivia S; Rogalla, Ralph; Siegelin, Ivonne
    Life insurers use accounting and actuarial techniques to smooth reporting of firm assets and liabilities, seeking to transfer surpluses in good years to cover benefit payouts in bad years. Yet these techniques been criticized as they make it difficult to assess insurers’ true financial status. We develop stylized and realistically-calibrated models of participating lifetime annuities, an insurance product that pays retirees guaranteed lifelong benefits along with variable nonguaranteed surplus. Our goal is to illustrate how accounting and actuarial techniques for this product shape policyholder wellbeing as well as insurer profitability and stability. We show that smoothing adds value to both the annuitant and the insurer, so curtailing smoothing could undermine the market for long-term retirement payout products.
  • Publication
    Participating Payout Life Annuities: Lessons from Germany
    (2012-05-01) Maurer, Raimond; Rogalla, Ralph; Siegelin, Ivonne
    This paper analyzes the regulatory framework of German immediate participating payout life annuities (PLAs), which offer guaranteed minimum benefits as well as participation in insurers’ surpluses. Our particular focus lies on the mechanics of sharing surpluses between shareholders and policyholders. We show that the process of surplus determination, allocation, and distribution mostly follows transparent and clear rules, and that an insurance company’s management has limited leeway with respect to discretionary decision making. Subsequently, we develop an Asset Liability Model for a German life insurer that offers PLAs. Based on this model, we run Monte Carlo simulations to evaluate benefit variability and insurer stability under stochastic mortality and capital market developments. Our results suggest that through PLAs guaranteed benefits can be provided with high credibility, while, at the same time, annuitants receive attractive Money’s Worth Ratios. Moreover, we show that it might be difficult to offer a fixed benefit annuity providing the same lifetime utility as a PLA for the same premium and a comparably low insolvency risk. Overall, participating life annuity schemes may be an efficient way to deal with risk factors that are highly unpredictable and difficult to hedge over the long run, such as systematic mortality and investment risks.