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Empirical Risk Analysis of Pension Insurance: The Case of Germany
Author(s) -
Gerke Wolfgang,
Mager Ferdinand,
Reinschmidt Timo,
Schmieder Christian
Publication year - 2008
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/j.1539-6975.2008.00283.x
Subject(s) - pension , pension fund , pension insurance , bankruptcy , actuarial science , pension plan , portfolio , business , economics , finance
The book reserve system is the most widespread method of financing occupational pension plans in Germany. The pension liabilities are mutually insured by the Pensions‐Sicherungs‐Verein VVaG (PSVaG) against bankruptcy. The PSVaG recently stated that the insurance system needed to be reformed. In the future, risk‐adjusted premiums as foreseen for the newly established Pension Protection Fund in the United Kingdom could become feasible. We perform a credit portfolio analysis to determine the risk profile of the PSVaG. The magnitude of a tail risk event suggests that under the current financing system it can only be smoothed out over decades. Under an expected loss pricing plan insurance premiums would vary greatly. In a marginal risk contribution approach the variation of the premiums would be less pronounced.