Financial Guarantees in Brazilian Life Insurance and Pension Plans
19 Pages Posted: 19 Jul 2009
Date Written: July 17, 2009
Recently regulated Brazilian life and pension products offer a benefit structure composed of minimum guaranteed annual rate, inflation adjustment according to a price index and participation on an investment fund performance. We present a valuation model for these products. We establish a fair condition relationship between minimum guarantees and participation rates, and explore its behavior over a space of maturities, interest rates, and also fund and price index volatilities and correlation. Besides consistency to reference models, we found that the effect of the fund volatility is conditioned to the price index volatility level and the correlation between them.
Keywords: Brazil, Life-Insurance, Financial, Guarantee
JEL Classification: G00
Suggested Citation: Suggested Citation