Life Annuity Products and Their Guarantees

image of Life Annuity Products and Their Guarantees

This publication helps policy makers to better understand annuity products and the guarantees they provide in order to optimise the role that these products can play in financing retirement. Product design is a crucial factor in the potential role of annuity products within the pension system, along with the cost and demand for these products, and the resulting risks that are borne by the annuity providers. Increasingly complex products, however, pose additional challenges concerning consumer protection. Consumers need to be aware of their options and have access to unbiased and comprehensible advice and information about these products.



The risks presented by annuity products and how they are managed

The chapter first provides a brief overview of the general approach to modern risk management. It then summarises the different types of risks which annuity providers can face. Finally, the risks specific to each type of annuity product are discussed in detail. This discussion addresses two aspects of the drivers of risk exposure and their management: the risks arising from the annuity product design and the assumptions used, and how the risk exposures can be controlled and mitigated going forward.


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