Condidering Surrender And Limiting The Maximum Rate Of Return In Pricing Equity Index Annuities

At present, the world population aged 60 or older has reached 600 million, More than 60 countries of the elderly population reached or exceeded 10% of the total population, into the ranks of aging society. It caused the United Nations and governments around the world attention and concern that population aging rapids. China's current aging population has more than 160 million, and the rate of annual increase of nearly 800 million. Experts predict that china's aging population will reach one-third of the total population by 2050. The rapid increase in elderly population, especially senior citizens over 80 years old and disabled elderly annual grows at rate of 100 million. Life of the elderly care, rehabilitation care, health care, spiritual and cultural needs of an increasing prominent, pension problems has been critical.In view of the seriousness of the aged, the development of pension insurance products must be performed. Traditional insurance products have a common defect, they will be insured fixed rate of return. It could make the product holders yield a lot of revenue that the rate of+ the future income increases, it could make the insurance companies face the risk of large amounts of cash outflows that the rate of the future income decreases. To overcome this shortcoming, equity index annuities have emerged. Equity index annuity is a new type of annuity products. Which overcomes the shortcoming of traditional annuity products, it allows the holder to enjoy a rising stock price index in the capital gains, it provides a minimum guaranteed rate of return when the stock index falls. In this paper, mainly from two aspects to improve the pricing equity indexed annuities. One aspect, for insurance products for the surrender is possible, but the likehood is relatively large. While the previous equity index annuity factors into account did not surrender, which makes the resulting low price of equity index annuities, did not surrender the risk of insurance companies take into account the damage caused, so the price is not obtained reasonable. On the other hand is based on improving the attractiveness of equity index annuities equity index annuities for purposes of pricing. Equity index annuities used here limit the maximum rate of return to lower prices of equity index annuity contracts allow more people to participate in the equity index annuity products.This equity index annuity surrender caused by two main factors. The first factor is the death of the insured risk of death. Previous equity index annuity pricing in the risk of death or not considered or be considered as fixed, the risk of death in this article will be considered as random with a mortality rate that. In this section and the previous equity index annuity pricing and a ralatively large difference is the use of equity indexed annuities have a minimum guaranteed rate of rate of return of the properties, the equity index annuity pricing and option pricing linked, then use option pricing to get the benefits index annuity pricing. The second factor is that the insured voluntarily surrender. Mainly because of the insured policyholder voluntarily surrender the insurance products that the opportunity cost holding to maturity is too high, for the reason of the insured, he would give up the insurance products and invest in higher yielding other financial products, but the insured to the insurance company to pay a penalty. This article assumes that if the insured in this part of the surrender, he would receive the surrender of its investment in the stock market. Equity index annuity contracts to reduce prices, mainly by setting a maximum rate return, reducing the insured's income space . Based on the above considerations by the equity index annuity contracts, the price is more scientific and reasonable, to make better development of equity index annuities.