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December 2020

03Dec

Reconsidering Risk Aversion

By Daniel J. Benjamin, Mark Alan Fontana, Miles S. Kimball Risk aversion is typically inferred from real or hypothetical choices over risky lotteries, but such “untutored” choices may reflect mistakes rather than preferences. We develop a procedure to disentangle preferences from mistakes: after eliciting untutored choices, we confront participants with their choices that are inconsistent with expected-utility axioms (broken down enough to be self-evident) and allow them to reconsider their choices. We demonstrate this procedure via a survey about...

December 3, 2020
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November 2020

30Nov

Canadian pension funds, insurers seeking private debt face shrinking pool of lower-risk firms

Canadian pension funds and insurers are facing a shrinking universe of higher-quality private debt investments to lift returns in a low-yield world, as the coronavirus pandemic has crushed many businesses, while banks maintain lending to better ones. The tightening supply of this high-yielding credit comes as many Canadian institutional investors have been accelerating their exposure to the private debt. Private credit is issued primarily by closely held companies, offering a premium over corporate bonds due to fewer disclosures and...

November 30, 2020
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27Nov

Longevity Risk and Hedging Solutions

By Guy Coughlan, David P. Blake, Richard D. MacMinn, Andrew J. G. Cairns, Kevin Dowd Longevity risk – the risk of unanticipated increases in life expectancy – has only recently been recognized as a significant global risk that has materially raised the costs of providing pensions and annuities. We first discuss historical trends in the evolution of life expectancy and then analyze the hedging solutions that have been developed for managing longevity risk. One set of solutions has come...

November 27, 2020
Articles, Investment, Pension Management, ,
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10Nov

Risk Dashboard: European insurers slightly less exposed to risks compared to the beginning of COVID-19 outbreak but concerns remain

Today the European Insurance and Occupational Pensions Authority (EIOPA) published its updated Risk Dashboard based on the second quarter of 2020 Solvency II data. The results show that the risk exposures of the European Union insurance sector slightly reduced, compared to July risk assessment. Insurers are particularly exposed to very high levels of macro risk, while market, credit, profitability and solvency risks decreased to medium level. However, the risk assessment does not account for the outbreak of the second...

November 10, 2020
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04Nov

Milliman expands Pension Buyout Index to include competitive pricing rate, which drops to 100.2% in September

Milliman, Inc., a premier global consulting and actuarial firm, today announced the latest results of its Milliman Pension Buyout Index (MPBI). As the Pension Risk Transfer (PRT) market continues to grow, it has become increasingly important to monitor the annuity market for plan sponsors that are considering transferring retiree pension obligations to an insurer. Read also Retirement Saving Is Hard Even For Those Who Can Afford It While we continue to analyze annuity purchase rates from all insurers, starting this...

November 4, 2020
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03Nov

UK. Pensions risk transfer market resilient against Covid-19

The UK pensions risk transfer market has so far shown remarkable resilience to the economic impact of the Covid-19 pandemic. Although market conditions may mean some schemes will be further away from being able to de-risk than they were before the pandemic, the market remains busy and others will still be in a position to proceed with planned risk transfer activity. We can also expect to see a greater volume of forced transfer activity reaching the market in the...

November 3, 2020
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October 2020

29Oct

Reconsidering Risk Aversion

By Daniel J. Benjamin, Mark Alan Fontana, Miles S. Kimball Risk aversion is typically inferred from real or hypothetical choices over risky lotteries, but such “untutored” choices may reflect mistakes rather than preferences. We develop a procedure to disentangle preferences from mistakes: after eliciting untutored choices, we confront participants with their choices that are inconsistent with expected-utility axioms (broken down enough to be self-evident) and allow them to reconsider their choices. We demonstrate this procedure via a survey about...

October 29, 2020
Articles, Pension design, ,
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29Oct

Life-Care Tontines

By Peter Hieber, Nathalie Lucas This paper builds on the advantage of pooling mortality and morbidity risks, and their inherent natural hedge. We focus on classical mutual risk pooling schemes, i.e. tontines, and introduce a ``life-care tontine", which in addition to retirement income targets the needs of long-term care coverage for an ageing population. This scheme reduces adverse selection costs and is actuarially fair at each time. Pooling heterogeneous risks (i.e. different age groups) is shown to reduce overall...

October 29, 2020
Articles, Investment, Pension design, ,
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23Oct

Reconsidering Risk Aversion

By Daniel J. Benjamin, Mark Alan Fontana, Miles S. Kimball Risk aversion is typically inferred from real or hypothetical choices over risky lotteries, but such “untutored” choices may reflect mistakes rather than preferences. We develop a procedure to disentangle preferences from mistakes: after eliciting untutored choices, we confront participants with their choices that are inconsistent with expected-utility axioms (broken down enough to be self-evident) and allow them to reconsider their choices. We demonstrate this procedure via a survey about...

October 23, 2020
Articles, Investment, Savings, ,
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15Oct

5 retirement security risks that 2020 made worse

Retirement security was already on shaky ground when the calendar turned to January 1, ushering in a year of unprecedented and unexpected challenges that have compounded threats to global retirement security. According to Natixis Investment Managers’ 9th annual Global Retirement Index, the challenges of 2020 have disrupted financial markets, caused widespread unemployment and demanded urgent response from policy-makers, all of which could have long-reaching impacts on retirement security. The goal of the index is to provide an objective tool for...

October 15, 2020
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