@article{ART001101228},
author={Sung Jooho and Kim, Joon Seok},
title={An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System},
journal={Journal of Insurance and Finance},
issn={2384-3209},
year={2005},
volume={16},
number={1},
pages={3-32}
TY - JOUR
AU - Sung Jooho
AU - Kim, Joon Seok
TI - An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System
JO - Journal of Insurance and Finance
PY - 2005
VL - 16
IS - 1
PB - Korea Insurance Research Institute
SP - 3
EP - 32
SN - 2384-3209
AB - The process of converting home equity into cash is called the reverse mortgage
loan, which is designed to allow elderly homeowner to borrow living money (in a
form of annuity) by using the equity as collateral, without having to move out of his
property. In this paper, we define the life insurer’s risk in operating the tenure
reverse whole-life annuity mortgage system as a repayment shortfall risk and then
estimate the potential collateral loss that would occur if the value of outstanding
loan balance exceeds the value of the net collateral at the time of the death of the
borrower. To analyze the risk and potential loss, we introduced four-type risk
measures as indicators of the appropriateness of a reverse mortgage contract:
actuarial break-even time, actuarial shortfall probability, actuarial shortfall
expectation and actuarial mean duration.
We find out three main results through numerical illustrations: Firstly, in a view
of integrated risk management, it could be recommended to employ 80% more or
less (i.e. approximate 80%)equivalence principle as a pricing strategy. Secondly, the
reverse mortgage contract with last-survivor option would be more profitable than
single-life contract. Lastly, in order to vitalize the tenure reverse mortgage market,
the financial market should be even more activated rather than the real estate market.
KW - home equity;tenure reverse whole-life annuity mortgage;repayment shortfall risk;actuarial break-even time;actuarial shortfall expectation;last-survivor option;integrated risk management
DO -
UR -
ER -
Sung Jooho and Kim, Joon Seok. (2005). An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System. Journal of Insurance and Finance, 16(1), 3-32.
Sung Jooho and Kim, Joon Seok. 2005, "An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System", Journal of Insurance and Finance, vol.16, no.1 pp.3-32.
Sung Jooho, Kim, Joon Seok "An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System" Journal of Insurance and Finance 16.1 pp.3-32 (2005) : 3.
Sung Jooho, Kim, Joon Seok. An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System. 2005; 16(1), 3-32.
Sung Jooho and Kim, Joon Seok. "An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System" Journal of Insurance and Finance 16, no.1 (2005) : 3-32.
Sung Jooho; Kim, Joon Seok. An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System. Journal of Insurance and Finance, 16(1), 3-32.
Sung Jooho; Kim, Joon Seok. An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System. Journal of Insurance and Finance. 2005; 16(1) 3-32.
Sung Jooho, Kim, Joon Seok. An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System. 2005; 16(1), 3-32.
Sung Jooho and Kim, Joon Seok. "An Analysis of the Life Insurer's Risks in Operating Reverse Mortgage Loan System" Journal of Insurance and Finance 16, no.1 (2005) : 3-32.