Solvency risk minimizing guaranteed returns in life insurance

Return guarantee constitutes a key ingredient of classical life insurance premium calculation. In the current low interest rate environment insurers face increasingly strong financial incentives to reduce guaranteed returns embedded in life insurance contracts. However, return guarantee lowering efforts are restrained by associated demand effects, since a higher guaranteed return makes the net price of the insurance cover lower. This tradeoff between possibly higher future insurance obligations and the possibility of a larger demand for life insurance products can theoretically also be considered when determining optimal guaranteed returns. In this paper, optimality of return guarantee levels is analyzed from a solvency point of view. Availability and some other properties of optimal solutions for guaranteed returns are explored and compared in a simple model for two measures of solvency risk (company-level and contract-level VaR). The paper concludes that a solvency risk minimizing optimal guaranteed return may theoretically exist, although its practical availability can be impeded by economic and regulatory constraints.

Examination of Inequalities in Hungary by Microsimulation in Consistency with Macro Data

Effective decision making uses various databases including both micro and macro level datasets. In many cases it is a big challenge to ensure the consistency of the two levels. Different types of problems can occur and several methods can be used to solve them. The paper concentrates on the input alignment of the households’ income for microsimulation, which means refers to improving the elements of a micro data survey (EU-SILC) by using macro data from administrative sources. We use a combined micro-macro model called ECONS-TAX for this improvement. We also produced model projections until 2015 which is important because the official EU-SILC micro database will only be available in Hungary in the summer of 2017. The paper presents our estimations about the dynamics of income elements and the changes in income inequalities. Results show that the aligned data provides a different level of income inequality, but does not affect the direction of change from year to year. However, when we analyzed policy change, the use of aligned data caused larger differences both in income levels and in their dynamics.

Demográfiai hatások és implicit hozamok kapcsolata a nyugdíjrendszerekben = The relationship of demographic effects and implicit returns in pension systems

E tanulmány központi témája a nyugdíjrendszerek implicit hozama. Az együtt élő nemzedékek figyelembevételével felépülő nyugdíjmodellekben kétféle implicit hozamot különböztetünk meg. A hosszmetszeti implicit hozamot valamely adott nemzedékhez tartozó, különböző években esedékes pénzáramlások alapján, a keresztmetszeti implicit hozamot pedig több, különböző nemzedék adott évben jellemző pénzáramlásai alapján számíthatjuk ki. A hosszmetszeti és keresztmetszeti implicit hozamok értékeit és a közük lévő összefüggéseket a tőkefedezeti, a névleges egyéni számlás és a hagyományos felosztó-kirovó nyugdíjrendszerek egyszerű elméleti modelljeiben hasonlítjuk össze. A számításokhoz használt modellkeret fontos eleme a várható élettartam figyelembevétele. Az eredmények azt mutatják, hogy a maximális és a várható élettartam eltérésekor a hosszmetszeti és a keresztmetszeti implicit hozamok közötti összefüggések még egyszerű elméleti modellben is meglehetősen összetettek lehetnek. ____ The focus of this study is on the implicit returns of pension systems. Two types are analysed using an overlapping generations model: the calculation of longitudinal\" return is based on cash flows in different years belonging to a given generation, while cross-section\" implicit return is calculated in a given year with cash flows of multiple generations. Values and relationships of longitudinal and cross-section implicit returns are compared in simple theoretical models of fully funded\", notional defined-contribution\" and traditional pay-as-you-go\" pension systems. An important element of the theoretical model is the inclusion of an assumption about life expectancy. Model results point to the complexity of the relation between longitudinal and cross-section implicit returns, if expected and maximum life expectancy differ. The study maps and introduces these complex relationships.

Work-to-family spillover: Gender differences in Hungary

It is crucial to understand the role that labor market positions might play in creating gender differences in work–life balance. One theoretical approach to understanding this relationship is the spillover theory. The spillover theory argues that an individual’s life domains are integrated; meaning that well-being can be transmitted between life domains. Based on data collected in Hungary in 2014, this paper shows that work-to-family spillover does not affect both genders the same way. The effect of work on family life tends to be more negative for women than for men. Two explanations have been formulated in order to understand this gender inequality. According to the findings of the analysis, gender is conditionally independent of spillover if financial status and flexibility of work are also incorporated into the analysis. This means that the relative disadvantage for women in terms of spillover can be attributed to their lower financial status and their relatively low access to flexible jobs. In other words, the gender inequalities in work-to-family spillover are deeply affected by individual labor market positions. The observation of the labor market’s effect on work–life balance is especially important in Hungary since Hungary has one of the least flexible labor arrangements in Europe. A marginal log-linear model, which is a method for categorical multivariate analysis, has been applied in this analysis.