An Analysis of Money's Worth Ratios 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 an extensive dataset on individua...

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Main Authors:	Thorburn, Craig, Rocha, Roberto, Morales, Marco
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCUMULATED SAVINGS ADVERSE SELECTION ANNUITIES ANNUITIES MARKETS ANNUITY ANNUITY PAYMENT ANNUITY PROVIDERS ANNUITY PURCHASE ANNUITY RATE BOND RATE BONDS BROKERS CAPITAL MARKETS COMMISSIONS CONSUMERS COVERAGE DEFERRED ANNUITIES DISCLOSURE DISCOUNT RATES EXPECTED VALUE FINANCIAL INSTRUMENTS FIXED INCOME FUTURE MORTALITY IMPROVEMENTS GUARANTEED PERIOD INDIVIDUAL ACCOUNTS INSURANCE COMPANIES INSURERS INTEREST RATE INTEREST RATES LIFE ANNUITIES LIFE EXPECTANCIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LONGEVITY RISK MORTALITY TABLES NORMAL RETIREMENT AGE PAYOUT PENSION FUND PENSION FUND ADMINISTRATORS PENSION LAW PENSION REFORM PENSION REFORMS PENSION SYSTEM PENSIONERS PENSIONS PREMIUMS PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PILLARS RATES REGULATORY FRAMEWORK REINVESTMENT RISK REINVESTMENT RISKS RESERVES RETIREES RETIREMENT RETIREMENT INCOME RISK INSURANCE RISK PREMIUM RISK-FREE RATE SINGLE LIFE ANNUITY TRANSPARENCY VARIABLE ANNUITIES YIELD CURVES
Online Access:	http://documents.worldbank.org/curated/en/2006/05/6802120/analysis-moneys-worth-ratios-chile http://hdl.handle.net/10986/8450

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recordtype	oai_dc
spelling	okr-10986-84502021-04-23T14:02:40Z An Analysis of Money's Worth Ratios in Chile Thorburn, Craig Rocha, Roberto Morales, Marco ACCUMULATED SAVINGS ADVERSE SELECTION ANNUITIES ANNUITIES MARKETS ANNUITY ANNUITY PAYMENT ANNUITY PROVIDERS ANNUITY PURCHASE ANNUITY RATE BOND RATE BONDS BROKERS CAPITAL MARKETS COMMISSIONS CONSUMERS COVERAGE DEFERRED ANNUITIES DISCLOSURE DISCOUNT RATES EXPECTED VALUE FINANCIAL INSTRUMENTS FIXED INCOME FUTURE MORTALITY IMPROVEMENTS GUARANTEED PERIOD INDIVIDUAL ACCOUNTS INSURANCE COMPANIES INSURERS INTEREST RATE INTEREST RATES LIFE ANNUITIES LIFE EXPECTANCIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LONGEVITY RISK MORTALITY TABLES NORMAL RETIREMENT AGE PAYOUT PENSION FUND PENSION FUND ADMINISTRATORS PENSION LAW PENSION REFORM PENSION REFORMS PENSION SYSTEM PENSIONERS PENSIONS PREMIUMS PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PILLARS RATES REGULATORY FRAMEWORK REINVESTMENT RISK REINVESTMENT RISKS RESERVES RETIREES RETIREMENT RETIREMENT INCOME RISK INSURANCE RISK PREMIUM RISK-FREE RATE SINGLE LIFE ANNUITY TRANSPARENCY VARIABLE ANNUITIES YIELD CURVES 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 an extensive dataset on individual annuities to examine econometrically a measure of market performance-money's worth ratios (MWRs)-or the ratio of the expected present value of annuity payments to the premium. The results show that annuitants in Chile have generally a good deal for their premiums, as indicated by MWRs higher than one, and also higher than those estimated for other countries. The difference between Chile and other countries is striking considering that annuities in Chile are indexed to prices. The wide range of indexed instruments in Chile, allowing providers to hedge their risks while extracting higher returns, helps explain the difference. The high degree of market competition has also contributed to this outcome. Efforts to improve market transparency through a new electronic quotation system have decreased the dispersion of MWRs. Finally, MWRs tend to decrease for contracts with longer durations, reflecting pricing for higher longevity and reinvestment risks. These results are consistent with separate research on the annuity rate, and indicate the need to ensure competition and market transparency, as well as to develop appropriate financial instruments for providers to ensure good outcomes for annuitants. 2012-06-19T18:26:10Z 2012-06-19T18:26:10Z 2006-05 http://documents.worldbank.org/curated/en/2006/05/6802120/analysis-moneys-worth-ratios-chile http://hdl.handle.net/10986/8450 English Policy Research Working Paper; No. 3926 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	ACCUMULATED SAVINGS ADVERSE SELECTION ANNUITIES ANNUITIES MARKETS ANNUITY ANNUITY PAYMENT ANNUITY PROVIDERS ANNUITY PURCHASE ANNUITY RATE BOND RATE BONDS BROKERS CAPITAL MARKETS COMMISSIONS CONSUMERS COVERAGE DEFERRED ANNUITIES DISCLOSURE DISCOUNT RATES EXPECTED VALUE FINANCIAL INSTRUMENTS FIXED INCOME FUTURE MORTALITY IMPROVEMENTS GUARANTEED PERIOD INDIVIDUAL ACCOUNTS INSURANCE COMPANIES INSURERS INTEREST RATE INTEREST RATES LIFE ANNUITIES LIFE EXPECTANCIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LONGEVITY RISK MORTALITY TABLES NORMAL RETIREMENT AGE PAYOUT PENSION FUND PENSION FUND ADMINISTRATORS PENSION LAW PENSION REFORM PENSION REFORMS PENSION SYSTEM PENSIONERS PENSIONS PREMIUMS PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PILLARS RATES REGULATORY FRAMEWORK REINVESTMENT RISK REINVESTMENT RISKS RESERVES RETIREES RETIREMENT RETIREMENT INCOME RISK INSURANCE RISK PREMIUM RISK-FREE RATE SINGLE LIFE ANNUITY TRANSPARENCY VARIABLE ANNUITIES YIELD CURVES
spellingShingle	ACCUMULATED SAVINGS ADVERSE SELECTION ANNUITIES ANNUITIES MARKETS ANNUITY ANNUITY PAYMENT ANNUITY PROVIDERS ANNUITY PURCHASE ANNUITY RATE BOND RATE BONDS BROKERS CAPITAL MARKETS COMMISSIONS CONSUMERS COVERAGE DEFERRED ANNUITIES DISCLOSURE DISCOUNT RATES EXPECTED VALUE FINANCIAL INSTRUMENTS FIXED INCOME FUTURE MORTALITY IMPROVEMENTS GUARANTEED PERIOD INDIVIDUAL ACCOUNTS INSURANCE COMPANIES INSURERS INTEREST RATE INTEREST RATES LIFE ANNUITIES LIFE EXPECTANCIES LIFE EXPECTANCY LIFE INSURANCE LIFE INSURANCE COMPANIES LONGEVITY RISK MORTALITY TABLES NORMAL RETIREMENT AGE PAYOUT PENSION FUND PENSION FUND ADMINISTRATORS PENSION LAW PENSION REFORM PENSION REFORMS PENSION SYSTEM PENSIONERS PENSIONS PREMIUMS PRIVATE PENSION PRIVATE PENSION FUNDS PRIVATE PENSION SYSTEMS PRIVATE PILLARS RATES REGULATORY FRAMEWORK REINVESTMENT RISK REINVESTMENT RISKS RESERVES RETIREES RETIREMENT RETIREMENT INCOME RISK INSURANCE RISK PREMIUM RISK-FREE RATE SINGLE LIFE ANNUITY TRANSPARENCY VARIABLE ANNUITIES YIELD CURVES Thorburn, Craig Rocha, Roberto Morales, Marco An Analysis of Money's Worth Ratios in Chile
geographic_facet	Latin America & Caribbean Chile
relation	Policy Research Working Paper; No. 3926
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 an extensive dataset on individual annuities to examine econometrically a measure of market performance-money's worth ratios (MWRs)-or the ratio of the expected present value of annuity payments to the premium. The results show that annuitants in Chile have generally a good deal for their premiums, as indicated by MWRs higher than one, and also higher than those estimated for other countries. The difference between Chile and other countries is striking considering that annuities in Chile are indexed to prices. The wide range of indexed instruments in Chile, allowing providers to hedge their risks while extracting higher returns, helps explain the difference. The high degree of market competition has also contributed to this outcome. Efforts to improve market transparency through a new electronic quotation system have decreased the dispersion of MWRs. Finally, MWRs tend to decrease for contracts with longer durations, reflecting pricing for higher longevity and reinvestment risks. These results are consistent with separate research on the annuity rate, and indicate the need to ensure competition and market transparency, as well as to develop appropriate financial instruments for providers to ensure good outcomes for annuitants.
format	Publications & Research :: Policy Research Working Paper
author	Thorburn, Craig Rocha, Roberto Morales, Marco
author_facet	Thorburn, Craig Rocha, Roberto Morales, Marco
author_sort	Thorburn, Craig
title	An Analysis of Money's Worth Ratios in Chile
title_short	An Analysis of Money's Worth Ratios in Chile
title_full	An Analysis of Money's Worth Ratios in Chile
title_fullStr	An Analysis of Money's Worth Ratios in Chile
title_full_unstemmed	An Analysis of Money's Worth Ratios in Chile
title_sort	analysis of money's worth ratios in chile
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2006/05/6802120/analysis-moneys-worth-ratios-chile http://hdl.handle.net/10986/8450
_version_	1764406041876889600

An Analysis of Money's Worth Ratios in Chile

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