DEAMS Research Paper Series 2020, 1

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Anna Rita Bacinello, Chiara Corsato, Pietro Millossovich

On the optimal design of participating life insurance contracts

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    On the optimal design of participating life insurance contracts
    (EUT Edizioni Università di Trieste, 2020)
    Bacinello, Anna Rita
    ;
    Corsato, Chiara
    ;
    Millossovich, Pietro
    In this paper we study how policyholders and equityholders contribute to the formation of a life insurance company issuing participating contracts. The structure of these contracts is stylized and features a guaranteed rate of return and a terminal bonus, as in the pioneering model by Briys and de Varenne (1994, 1997). Policyholders aim at maximizing their preferences by choosing the leverage ratio and the guaranteed level, while being subject to regulatory constraints of fair valuation and solvency. We provide conditions under which non trivial contracts exist and analyze their properties.
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