McCarthy, David
Email Address
ORCID
Disciplines
3 results
Search Results
Now showing 1 - 3 of 3
Publication Estimating International Adverse Selection in Annuities(2001-05-01) Mitchell, Olivia S; McCarthy, DavidIt is well known that purchasers of annuities have lower mortality than the general population. Less widely known is the quantitative extent of this adverse selection and how it varies across countries. This paper proposes and applies several methods for comparing alternative mortality tables and illustrates their impact on annuity valuation for men and women in the US and the UK. Our results indicate that the relatively lower mortality among older Americans who purchase annuities is equivalent to using a discount rate that is 50-100 basis points below the UK rate for compulsory annuitants, or 10-20 basis points lower than the UK rate for voluntary annuitants. We then draw on the mortality experience of over half a billion lives to estimate mortality differentials due to varying degrees of adverse selection controlling for country, gender, and an allowance for mortality improvements. Results show that adverse selection associated with the purchase of individual annuities reduces mortality rates by at least 25% in the international context. We also find that the system of mortality tables used to value Japanese annuities is quite distinct from international norms.Publication International Adverse Selection in Life Insurance and Annuities(2002-01-01) McCarthy, David; Mitchell, Olivia SThis paper evaluates the extent of adverse selection in life insurance and annuities in international markets. We examine the extent of adverse selection in group and individual life insurance. In addition we also compare results with prior analyses of adverse selection in international annuity markets, focusing on the US, UK and Japan. Our results may be used to assess the extent to which life insurers can hedge mortality exposure by writing both life insurance and annuities, and to determine a normal range for adverse selection in international insurance markets.Publication Assessing the Impact of Mortality Assumptions on Annuity Valuation: Cross-Country Evidence(2001-01-01) McCarthy, David; Mitchell, Olivia SEvaluating the money’s worth of annuities requires one to employ an assumed mortality table. In practice, of course, there are many measures of mortality probabilities including cohort, period, annuity and population mortality tables that differ by age and sex. Each of these tends to differ across countries, as well, making it difficult to compare the working of annuity markets internationally. This paper proposes several methods for comparing alternative mortality tables and illustrates their impact on annuity valuation for men and women in the US, the UK, and Australia. Our results indicate that the relatively lower mortality among older Americans who purchase annuities is equivalent to using a discount rate that is 50-100 basis points below the UK rate for compulsory annuitants, or 10-20 basis points lower than the UK rate for voluntary annuitants. Australian mortality rates are notably lighter than those in both the UK and US.