Uniqueness of the Fair Premium for Equity-Linked Life Insurance Contracts
THE GENEVA PAPERS ON RISK AND INSURANCE THEORY, Vol. 21 No. 1, June 1996
Posted: 21 May 1996
An equity-linked life insurance contract combines an endowment life insurance and an investment strategy with a minimum guarantee. The benefit of this contract is determined by the guaranteed amount plus a bonus equal to a call on the portfolio. This bonus is similar to an Asian option. We analyze the relationship between the periodic insurance premium and its proportional share invested into the portfolio. For a general model of the financial risks we show the existence and uniqueness of an insurance premium. Furthermore the premium is strictly increasing and convex as a function of the share invested.
JEL Classification: C15, G22
Suggested Citation: Suggested Citation