Publication Type
Journal Article
Version
publishedVersion
Publication Date
3-2019
Abstract
The Hong Kong Mortgage Corporation (HKMC) Limited, which was established in March 1997 and is wholly owned by the government of the Hong Kong Special Administrative Region, has a major mission to develop and provide different financial retirement instruments to Hong Kong residents to help address the income poverty of retirees. In June 2017, HKMC Annuity Limited, a wholly-owned subsidiary of the HKMC was incorporated to implement a new life annuity scheme which would be launched by mid-2018 to cater for the needs of cash-rich Hong Kong old age residents. The objective of the scheme is to provide an additional financial retirement planning option with minimum credit risk and a certain level of liquidity to the elderly by turning lump-sum premiums into lifetime streams of monthly income at a reasonable and stable return rate. In this paper, we establish an actuarial framework to model this life annuity scheme. The framework enables us to estimate the monthly annuity payments one might receive for a certain amount of investment. It also allows us to analyze the risk entailed in the product, thus shedding light on how the underlying risk can be managed through product design. Our findings will help potential subscribers to understand the scheme and decide whether this scheme should be included in their retirement investment portfolios when it is launched in 2018.
Keywords
Life annuity, actuarial model, mortality, equivalence principle, inflation risk
Discipline
Econometrics | Finance | Insurance
Research Areas
Econometrics
Publication
Asia-Pacific Journal of Risk and Insurance
Volume
14
Issue
1
First Page
1
Last Page
12
ISSN
2153-3792
Identifier
10.1515/apjri-2018-0013
Publisher
De Gruyter
Embargo Period
4-30-2021
Citation
KWONG, Koon Shing; CHAN, Wai-Sum; and LI, Johnny Siu-Hang.
Actuarial modeling and analysis of the Hong Kong Life Annuity Scheme. (2019). Asia-Pacific Journal of Risk and Insurance. 14, (1), 1-12.
Available at: https://ink.library.smu.edu.sg/soe_research/2470
Copyright Owner and License
Publisher
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1515/apjri-2018-0013