Bequest-embedded annuities and tontines

49 Pages Posted: 22 Jun 2020 Last revised: 21 Dec 2020

See all articles by An Chen

An Chen

Ulm University - Institute of Insurance Science

Manuel Rach

University of St. Gallen

Date Written: December 21, 2020


In the present paper, we propose death benefits be directly embedded in retirement products to promote their attractiveness, where annuities and tontines are used as representative retirement products. As we assume that the death benefits will be passed on to the heirs of policyholders, these benefits can be considered as bequests. We find that both from the policyholders' and insurers' perspective, embedding bequests directly in the retirement products can increase the attractiveness of the retirement products and promote their sale. From the insurers' perspective, without including death benefits, the insurers play purely an administrative role in a tontine product, while adding the bequest benefits makes the tontines real insurance products and incentivizes the insurers to actively provide these innovative retirement products. Further, adding the bequest benefits upon the death of the policyholder, some natural hedging is incorporated in the survival payments, which reduces the solvency capital the insurers are required to set aside.

Keywords: annuity, tontine, bequest motive, optimal retirement product design

JEL Classification: G22, J32

Suggested Citation

Chen, An and Rach, Manuel, Bequest-embedded annuities and tontines (December 21, 2020). Available at SSRN: or

An Chen

Ulm University - Institute of Insurance Science ( email )

Ulm, 89081


Manuel Rach (Contact Author)

University of St. Gallen

Tannenstrasse 19
St.Gallen, 9000

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics