Life annuities

Abstract Great attention is currently devoted to the management of life annuity portfolios, both from a theoretical and a practical point of view, because of the growing importance of annuity benefits paid by private pension schemes. In particular, the progressive shift from defined benefit to defined contribution pension plans has increased the interest in life annuities, which are the principal delivery mechanism of defined contribution pension plans. Among the risks which affect life insurance and life annuity portfolios, longevity risk deserves a deep and detailed investigation and requires the adoption of proper management solutions. Longevity risk, which arises from the random future trend in mortality at adult and old ages, is a rather novel risk. Careful investigations are required to represent and measure it, and to assess the relevant impact on the financial results of life annuity portfolios and pension plans.