Options for insurers
1. Reduce the cost of annuities by taking less risk
̤ Account-based annuities: pass investment and longevity risk back to individuals
̤ Tontine or non-guaranteed annuities: pool risk amongst individuals but with limits
on systematic risk across a portfolio
̤ Return of premium annuities: offer death benefit/bequest to reduce sensitivity to mortality
(but potentially increased sensitivity to interest rates)
̤ Lobby for compulsory annuitization to reduce self-selection risks and seek economies of scale
2. Take more risk to justify high price
̤ Variable annuities: provide individuals with investment upside in return for fee income
̤ Liquidity annuities: provide individuals with liquidity in return for option premium
̤ Combined longevity benefits with other old-age risk (e.g. hospitalization or long-term care)