Could anyone please explain why annuity business has the opposite exposure compared to that of the life insurance business?
Think about the present value of their obligations
Life insurance: they pay once when you die.
The longer you live, the less the present value of that payment is.
Annuity: they keep paying you until you die.
The longer you live, the more payments they have to make
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Could you please introduce annuity insurance?
I think that annuity insurance is when you die, they pay annuity the the beneficiary.
An annuity is just a contract that pays a periodic income as long as a person is alive. Once the person dies, the payments stop. That’s the bare bones version: the annuitant can also specify a guarantee period, during which payments continue to the beneficiary to the end of the guarantee period. Also, insurers can issue joint annuities where if at least one of the annuitants is alive, payments continue to the survivor and stop on the survivor’s death.
For life insurance, one of the settlement options the beneficiary can choose instead of a lump sum is an annuity. The beneficiary can also incude a guarantee period, joint annuitant(s), etc.
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Thank you so much!