variable annuity, aggregate mortality risk, risk aversion

Mortality Risk and Pricing of Annuities

This paper discusses the way in which payments from pooled annuity funds need to be adjusted to take account of the fact that future mortality rates are uncertain. Mortalityadjusted annuities, as we describe payments from the pooled fund are variable annuities in which aggregate mortality risk is transferred from the seller of annuitees to the annuitants. If annuitants are risk averse the payments from the fund should be adjusted to reflect this.