An Empirical Analysis of the Annuity Rate in Chile

Empirical analyses of annuities markets have been limited to a few industrial countries and restricted by data limitations. Chile provides excellent conditions for research on annuities because of the depth of its market and the availability of data. The authors use a panel of life insurance company...

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Main Authors:	Rocha, Roberto, Morales, Marco, Thorburn, Craig
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ADVERSE SELECTION AGENTS AGGREGATE DEMAND AGGREGATE SUPPLY ANNUITIES ANNUITIES MARKETS ANNUITY ANNUITY MARKETS ANNUITY PROVIDERS ANNUITY RATE ANNUITY RATES ASSETS AVERAGE COSTS BANKRUPTCY BROKERS CAPITAL MARKETS CENTRAL BANK COMMERCIAL BANKS COMMISSIONS CONSUMERS CREDIT RISK DEMAND CURVE DISCLOSURE DISCLOSURE RULES ECONOMETRIC ANALYSIS ECONOMIES OF SCALE EXPECTED PRESENT VALUE EXPECTED RETURNS FINANCIAL ASSETS FINANCIAL INSTRUMENTS FINANCIAL SECTOR FIXED ANNUITIES FIXED INCOME GDP GOVERNMENT BONDS INDEXED BONDS INSURANCE COMPANY INSURANCE INDUSTRY INTEREST RATE INTEREST RATES INTERNAL RATE OF RETURN LIFE ANNUITIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUIDITY LONGEVITY RISKS MACROECONOMIC CONDITIONS MARKET RISK MONOPOLY MORTALITY TABLES MORTGAGES NORMAL RETIREMENT AGE OPPORTUNITY COST PAYOUT PENSION FUND PENSION FUND ADMINISTRATORS PENSION LAW PENSION REFORM PENSION REFORMS PENSION SAVINGS PENSION SYSTEM PENSIONERS PENSIONS PORTFOLIO PORTFOLIO COMPOSITION PORTFOLIO RETURN PORTFOLIO RETURNS PORTFOLIOS PREMIUMS PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PILLARS PROFIT MARGINS PROFIT MAXIMIZATION RATES OF RETURN REINVESTMENT RISK RESERVES RETIREES RETIREMENT RETIREMENT INCOME RISK AVERSION RISK PREMIUM RISK-FREE RATE ROA SAVINGS SECURITIES STATEMENTS STRUCTURAL CHANGE SUBSTITUTION EFFECT SUPERVISORY AGENCY TRANSPARENCY TREASURY BONDS UNDERWRITING VALUATION WAGES WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2006/06/6822636/empirical-analysis-annuity-rate-chile http://hdl.handle.net/10986/8456

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spelling	okr-10986-84562021-04-23T14:02:40Z An Empirical Analysis of the Annuity Rate in Chile Rocha, Roberto Morales, Marco Thorburn, Craig ADVERSE SELECTION AGENTS AGGREGATE DEMAND AGGREGATE SUPPLY ANNUITIES ANNUITIES MARKETS ANNUITY ANNUITY MARKETS ANNUITY PROVIDERS ANNUITY RATE ANNUITY RATES ASSETS AVERAGE COSTS BANKRUPTCY BROKERS CAPITAL MARKETS CENTRAL BANK COMMERCIAL BANKS COMMISSIONS CONSUMERS CREDIT RISK DEMAND CURVE DISCLOSURE DISCLOSURE RULES ECONOMETRIC ANALYSIS ECONOMIES OF SCALE EXPECTED PRESENT VALUE EXPECTED RETURNS FINANCIAL ASSETS FINANCIAL INSTRUMENTS FINANCIAL SECTOR FIXED ANNUITIES FIXED INCOME GDP GOVERNMENT BONDS INDEXED BONDS INSURANCE COMPANY INSURANCE INDUSTRY INTEREST RATE INTEREST RATES INTERNAL RATE OF RETURN LIFE ANNUITIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUIDITY LONGEVITY RISKS MACROECONOMIC CONDITIONS MARKET RISK MONOPOLY MORTALITY TABLES MORTGAGES NORMAL RETIREMENT AGE OPPORTUNITY COST PAYOUT PENSION FUND PENSION FUND ADMINISTRATORS PENSION LAW PENSION REFORM PENSION REFORMS PENSION SAVINGS PENSION SYSTEM PENSIONERS PENSIONS PORTFOLIO PORTFOLIO COMPOSITION PORTFOLIO RETURN PORTFOLIO RETURNS PORTFOLIOS PREMIUMS PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PILLARS PROFIT MARGINS PROFIT MAXIMIZATION RATES OF RETURN REINVESTMENT RISK RESERVES RETIREES RETIREMENT RETIREMENT INCOME RISK AVERSION RISK PREMIUM RISK-FREE RATE ROA SAVINGS SECURITIES STATEMENTS STRUCTURAL CHANGE SUBSTITUTION EFFECT SUPERVISORY AGENCY TRANSPARENCY TREASURY BONDS UNDERWRITING VALUATION WAGES WEALTH Empirical analyses of annuities markets have been limited to a few industrial countries and restricted by data limitations. Chile provides excellent conditions for research on annuities because of the depth of its market and the availability of data. The authors use a panel of life insurance company data to examine econometrically the main determinants of the annuity rate, defined as the internal rate of return on annuities. The results indicate that the annuity rate is determined by the risk-free interest rate, the share of privately-issued higher yield securities in the portfolio of providers as a proxy for the spread over the risk-free rate, the leverage of providers, the level of broker's commissions, the market share of individual providers, the level of the premium, and the degree of market competition. The results also show that efforts to improve market transparency produced structural shifts in the parameters of the annuity rate equation. The results are consistent with separate research on money's worth ratios, and indicate the need to develop appropriate financial instruments, allowing providers to hedge their risks while extracting higher returns, and also to ensure competition and transparency in annuities markets, in order to ensure good outcomes for annuitants. 2012-06-19T18:42:00Z 2012-06-19T18:42:00Z 2006-06 http://documents.worldbank.org/curated/en/2006/06/6822636/empirical-analysis-annuity-rate-chile http://hdl.handle.net/10986/8456 English Policy Research Working Paper; No. 3929 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Chile
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ADVERSE SELECTION AGENTS AGGREGATE DEMAND AGGREGATE SUPPLY ANNUITIES ANNUITIES MARKETS ANNUITY ANNUITY MARKETS ANNUITY PROVIDERS ANNUITY RATE ANNUITY RATES ASSETS AVERAGE COSTS BANKRUPTCY BROKERS CAPITAL MARKETS CENTRAL BANK COMMERCIAL BANKS COMMISSIONS CONSUMERS CREDIT RISK DEMAND CURVE DISCLOSURE DISCLOSURE RULES ECONOMETRIC ANALYSIS ECONOMIES OF SCALE EXPECTED PRESENT VALUE EXPECTED RETURNS FINANCIAL ASSETS FINANCIAL INSTRUMENTS FINANCIAL SECTOR FIXED ANNUITIES FIXED INCOME GDP GOVERNMENT BONDS INDEXED BONDS INSURANCE COMPANY INSURANCE INDUSTRY INTEREST RATE INTEREST RATES INTERNAL RATE OF RETURN LIFE ANNUITIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUIDITY LONGEVITY RISKS MACROECONOMIC CONDITIONS MARKET RISK MONOPOLY MORTALITY TABLES MORTGAGES NORMAL RETIREMENT AGE OPPORTUNITY COST PAYOUT PENSION FUND PENSION FUND ADMINISTRATORS PENSION LAW PENSION REFORM PENSION REFORMS PENSION SAVINGS PENSION SYSTEM PENSIONERS PENSIONS PORTFOLIO PORTFOLIO COMPOSITION PORTFOLIO RETURN PORTFOLIO RETURNS PORTFOLIOS PREMIUMS PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PILLARS PROFIT MARGINS PROFIT MAXIMIZATION RATES OF RETURN REINVESTMENT RISK RESERVES RETIREES RETIREMENT RETIREMENT INCOME RISK AVERSION RISK PREMIUM RISK-FREE RATE ROA SAVINGS SECURITIES STATEMENTS STRUCTURAL CHANGE SUBSTITUTION EFFECT SUPERVISORY AGENCY TRANSPARENCY TREASURY BONDS UNDERWRITING VALUATION WAGES WEALTH
spellingShingle	ADVERSE SELECTION AGENTS AGGREGATE DEMAND AGGREGATE SUPPLY ANNUITIES ANNUITIES MARKETS ANNUITY ANNUITY MARKETS ANNUITY PROVIDERS ANNUITY RATE ANNUITY RATES ASSETS AVERAGE COSTS BANKRUPTCY BROKERS CAPITAL MARKETS CENTRAL BANK COMMERCIAL BANKS COMMISSIONS CONSUMERS CREDIT RISK DEMAND CURVE DISCLOSURE DISCLOSURE RULES ECONOMETRIC ANALYSIS ECONOMIES OF SCALE EXPECTED PRESENT VALUE EXPECTED RETURNS FINANCIAL ASSETS FINANCIAL INSTRUMENTS FINANCIAL SECTOR FIXED ANNUITIES FIXED INCOME GDP GOVERNMENT BONDS INDEXED BONDS INSURANCE COMPANY INSURANCE INDUSTRY INTEREST RATE INTEREST RATES INTERNAL RATE OF RETURN LIFE ANNUITIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LIQUIDITY LONGEVITY RISKS MACROECONOMIC CONDITIONS MARKET RISK MONOPOLY MORTALITY TABLES MORTGAGES NORMAL RETIREMENT AGE OPPORTUNITY COST PAYOUT PENSION FUND PENSION FUND ADMINISTRATORS PENSION LAW PENSION REFORM PENSION REFORMS PENSION SAVINGS PENSION SYSTEM PENSIONERS PENSIONS PORTFOLIO PORTFOLIO COMPOSITION PORTFOLIO RETURN PORTFOLIO RETURNS PORTFOLIOS PREMIUMS PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PILLARS PROFIT MARGINS PROFIT MAXIMIZATION RATES OF RETURN REINVESTMENT RISK RESERVES RETIREES RETIREMENT RETIREMENT INCOME RISK AVERSION RISK PREMIUM RISK-FREE RATE ROA SAVINGS SECURITIES STATEMENTS STRUCTURAL CHANGE SUBSTITUTION EFFECT SUPERVISORY AGENCY TRANSPARENCY TREASURY BONDS UNDERWRITING VALUATION WAGES WEALTH Rocha, Roberto Morales, Marco Thorburn, Craig An Empirical Analysis of the Annuity Rate in Chile
geographic_facet	Latin America & Caribbean Chile
relation	Policy Research Working Paper; No. 3929
description	Empirical analyses of annuities markets have been limited to a few industrial countries and restricted by data limitations. Chile provides excellent conditions for research on annuities because of the depth of its market and the availability of data. The authors use a panel of life insurance company data to examine econometrically the main determinants of the annuity rate, defined as the internal rate of return on annuities. The results indicate that the annuity rate is determined by the risk-free interest rate, the share of privately-issued higher yield securities in the portfolio of providers as a proxy for the spread over the risk-free rate, the leverage of providers, the level of broker's commissions, the market share of individual providers, the level of the premium, and the degree of market competition. The results also show that efforts to improve market transparency produced structural shifts in the parameters of the annuity rate equation. The results are consistent with separate research on money's worth ratios, and indicate the need to develop appropriate financial instruments, allowing providers to hedge their risks while extracting higher returns, and also to ensure competition and transparency in annuities markets, in order to ensure good outcomes for annuitants.
format	Publications & Research :: Policy Research Working Paper
author	Rocha, Roberto Morales, Marco Thorburn, Craig
author_facet	Rocha, Roberto Morales, Marco Thorburn, Craig
author_sort	Rocha, Roberto
title	An Empirical Analysis of the Annuity Rate in Chile
title_short	An Empirical Analysis of the Annuity Rate in Chile
title_full	An Empirical Analysis of the Annuity Rate in Chile
title_fullStr	An Empirical Analysis of the Annuity Rate in Chile
title_full_unstemmed	An Empirical Analysis of the Annuity Rate in Chile
title_sort	empirical analysis of the annuity rate in chile
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2006/06/6822636/empirical-analysis-annuity-rate-chile http://hdl.handle.net/10986/8456
_version_	1764406049352187904

An Empirical Analysis of the Annuity Rate in Chile

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