The uncertainty risk driver within a life annuity context: an overview

The paper analyzes the longevity effects on the portfolio valuations. This is a relevant topic, in particular from the perspective of insurers/sponsors of pension funds. The models chosen for actuarial calculations have to capture the survival trend and to project its forecasted future improvements. The uncertainty in the choice is a huge concern and constitutes a relevant systematic risk driver itself, called uncertainty risk therein. Aim of the paper is to measure the uncertainty risk and to show its trend in several contexts, meaningful in portfolio valuations. To this purpose the authors provide a suitable risk index and apply it in three different valuations: the initial value of an immediate life annuity portfolio; the fund of a pension annuity portfolio; the surplus of a portfolio consisting of deferred life annuities. Some graphs illustrate the results.