2013/11/20 by Catherine Donnelly, Donnelly, Catherine · 1 citation
Business, Management and Accounting · Health Professions · Social Sciences · #FOS: Economics and business #Financial Literacy, Pension, Retirement Analysis #General Finance (q-fin.GN) #Global Health Care Issues #Insurance, Mortality, Demography, Risk Management #Portfolio Management (q-fin.PM)
paper · pdf · doi:10.48550/arxiv.1311.5120
openalex publication_date 2013/11/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
Various types of structures that enable a group of individuals to pool their mortality risk have been proposed in the literature. Collectively, the structures are called pooled annuity funds. Since the pooled annuity funds propose different methods of pooling mortality risk, we investigate the connections between them and find that they are genuinely different for a finite heterogeneous membership profile. We discuss the importance of actuarial fairness, defined as the expected benefits equalling the contributions for each member, in the context of pooling mortality risk and comment on whether actuarial unfairness can be seen as solidarity between members. We show that, with a finite number of members in the fund, the group self-annuitization scheme is not actuarially fair: some members subsidize the other members. The implication is that the members who are subsidizing the others may obtain a higher expected benefit by joining a fund with a more favourable membership profile. However, we find that the subsidies are financially significant only for very small or highly heterogeneous membership profiles.