Wharton Pension Research Council Working Papers
 

Title

Accounting-based Asset Return Smoothing in Participating Life Annuities: Implications for Annuitants, Insurers, and Policymakers Implications for Annuitants, Insurers, and Policymakers

Document Type

Working Paper

Date of this Version

8-2-2015

Abstract

This chapter outlines the conditions under which accounting-based smoothing can be beneficial for policyholders who hold with-profit or participating payout life annuities (PLAs). We use a realistically-calibrated model of PLAs to explore how alternative accounting techniques influence policyholder welfare as well as insurer profitability and stability. We find that accounting smoothing of participating life annuities is favorable to consumers and insurers, as it mitigates the impact of short-term volatility and enhances the utility of these long-term annuity contracts.

Comments

The published version of this Working Paper may be found in the 2016 publication: Retirement System Risk Management.

Working Paper Number

WP2015-15

Copyright/Permission Statement

All findings, interpretations, and conclusions of this paper represent the views of the authors and not those of the Wharton School or the Pension Research Council. © 2015 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.

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Date Posted: 12 March 2019