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Analyzing Guarantees in Variable Annuities

  • Journal of Insurance and Finance
  • 2011, 22(2), pp.3-25
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management

김융희 1 Kim, Changki 1

1고려대학교

Accredited

ABSTRACT

In this study, we analyze the profit margin of variable annuities (VA) in Korean market and assess the risks embedded in the GMDB(guaranteed minimum death benefit) and GMAB (guaranteed minimum accumulation benefit) options. This paper shows that the real mortality costs and the real withdrawal rate have significant impact on the profit margin of VA products. We calculate the prices of the GMDB and GMAB options using simulation method and Black-Schloes option pricing model. The analysis shows that from the variable annuity market in Korea they have earned stable profits due to the conservative product structure and the favorable stock market. But there still exists the chance of losses from the embedded GMDB and GMAB options.

Citation status

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