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Effect of Reversionary Annuity Benefits on Actuarial Present Values

Abstract

A reversionary annuity is an annuity arrangement in which periodic payments commence or continue to a beneficiary following the death of another specified life. Such benefits are commonly associated with arrangements designed to provide continuing financial support to a spouse, dependent, or other beneficiary. The timing and amount of reversionary payments depend on the survival and mortality experience of the lives covered, making actuarial present value an important measure for determining the financial value of these benefits. This study will examine the effect of reversionary annuity benefits on actuarial present values. It will assess the extent to which variations in the amount, duration, and payment structure of reversionary annuity benefits influence their actuarial present values. The study will also examine how the timing of benefit commencement and the survival probabilities of the relevant lives affect the valuation of future annuity payments. The study will focus on reversionary annuity benefit amounts, payment periods, ages of the lives covered, mortality assumptions, survival probabilities, interest rate assumptions, and actuarial present values. Actuarial valuation techniques will be applied to estimate the present value of expected future reversionary payments under different benefit structures. The analysis will consider how changes in benefit levels and payment conditions influence the resulting actuarial values. A quantitative research approach will be adopted for the study. Relevant mortality data, life table functions, annuity factors, policy parameters, and actuarial assumptions will be analysed using actuarial present value techniques, survival probability calculations, and scenario analysis. Different reversionary annuity benefit structures will be modelled to estimate their corresponding actuarial present values. The resulting estimates will be compared to determine the effect of variations in benefit arrangements on actuarial values. The study is expected to reveal that variations in reversionary annuity benefits may produce significant differences in actuarial present values. Higher periodic benefits are expected to generate higher present values, while longer potential payment periods may also increase the value of the expected benefits. The findings may further show that mortality and interest rate assumptions significantly influence the timing and present value of reversionary annuity payments. The study will be useful to actuaries, life insurance companies, pension providers, underwriters, financial planners, regulators, and researchers. It may assist insurers in accurately valuing reversionary annuity contracts and assessing the financial obligations associated with continuing beneficiary payments. The findings may also support improved product design, pricing, reserve estimation, and actuarial decision-making involving reversionary benefits. The study concludes that reversionary annuity benefits can significantly influence actuarial present values through changes in benefit amounts, payment duration, survival probabilities, and valuation assumptions. It is therefore recommended that insurers apply appropriate actuarial valuation techniques and reliable mortality and interest rate assumptions when determining the present values of reversionary annuity benefits.

Keywords: Reversionary annuity benefits, actuarial present values, reversionary annuity, life insurance, annuity valuation, actuarial valuation, survival probabilities, mortality assumptions, interest rate assumptions, annuity payments, beneficiary benefits, life annuity, actuarial present value, insurance liabilities, annuity modelling.