Peter Hieber
Université de Lausanne (UNIL), HEC Lausanne, Switzerland
Research interests
This page gives some details on current research projects in Life and Pension Insurance.
Mutual insurance, risk sharing schemes, tontines
As state pensions decline, we need more and more private life and pension products to guarantee a sufficient retirement income. Mutual insurance products (for example pooled annuities, tontines) sharing risks within a pool of policyholders without guarantees by an insurer allow siginficantly reduced administration charges. Such products appear more and more on insurance markets (for example Tontine Trust, Le Conservateur).
We discuss the fairness of such insurance pools, focusing on aspects of heterogeneity in contract terms, mortality and sum insured.
Hieber, P.; Lucas, N.: Modern life-care tontines, ASTIN Bulletin: The Journal of the IAA, 52(2), 563-589, 2022. [Link] (open access, awarded the ASTIN-AFIR best paper award)
Denuit, M.; Hieber, P.; Robert, C.Y.: Mortality credits within large survivor funds. ASTIN Bulletin: The Journal of the IAA, 52(3), 813-834, 2022. [Link] (open access)
Chen, A.; Hieber, P.; Rach, M.: Optimal retirement products under subjective mortality beliefs. Insurance: Mathematics and Economics, 101(A), 55-69, 2021. [Link] (open access)
Chen, A.; Hieber, P.; Klein, J.: Tonuity: A novel individual-oriented retirement plan. ASTIN Bulletin: The Journal of the IAA, 49(1), 5-30, 2019. [Link] (open access, awarded the ASTIN-PBSS best paper award)
Valuation in Finance and Insurance
The valuation of Life and Pension insurance products is interesting as they are hybrid products containing both financial and insurance risk. This asks to unify the difference of financial valuation (e.g. by risk-neutral valuation) and insurance valuation (e.g. by premium principles based on the law of large numbers). Both concepts have there inherent strategies: hedging financial risk on financial markets and diversifying insurance risks by increasing portfolio size and pooling independent risks.
Deelstra, G.; Hieber, P.: Randomization and the valuation of Guaranteed Minimum Death Benefits, European Journal of Operational Research, 309(3), 1218-1236, 2023. [Link] [SSRN] (open access)
Hieber, P.; Natolski, J.; Werner, R.: Fair valuation of cliquet-style return guarantees in (homogeneous and) heterogeneous life insurance portfolios. Scandinavian Actuarial Journal, 2019(6), 478-507, 2019. [Link] [SSRN]
Deelstra, G.; Devolder, P.; Gnameho, K.; Hieber, P.: Valuation of hybrid financial and actuarial products in life insurance by a novel 3-step method, ASTIN Bulletin: The Journal of the IAA, 50(3), 709-742, 2020. [Link] (open access)
Hieber, P.: Cliquet-style return guarantees in a regime switching Lévy model, Insurance: Mathematics and Economics, Cliquet-style return guarantees in a regime switching Lévy model, 72, 138-147, 2017. [Link] [SSRN]
Optimal asset allocation, optimal contract design, insurance regulation
Investing for retirement, polichyolders aim for some minimal income (downside protection) while they want to participate in the upside potential of stock markets. Such asymmetric return distributions are achieved by dynamic investment strategies. We discuss optimal asset allocation and innovative contract design in these financial aspects. Asymmetric return distributions also appear in case of regulatory solvency constraints.
Optimal investment in a flexibility rider product.
Chen, A.; Hieber, P.; Sureth-Sloane, C.: Fee-Based Tax Certainty - Advance Tax Rulings, Multi-Dimensional Tax Uncertainty, and Risky Investment, working paper, 2022. [SSRN]
Chen, A.; Hieber, P.; Nguyen, T.: Constrained non-concave utility maximization: An application to life insurance contracts with guarantees. European Journal of Operational Research, 273(3), 1119-1135, 2019. [Link] [SSRN]
Chen, A.; Hieber, P.: Optimal Asset Allocation in Life Insurance: The Impact of Regulation. ASTIN Bulletin: The Journal of the IAA, 46(3), 605–626, 2016. [Link] (open access)
Guaranteed rates in a representative German life insurance portfolio.
Pooling participating life insurance contracts
We discuss the fairness of such insurance pools, focusing on aspects of heterogeneity in contract terms, mortality and sum insured.
This question of fairness is especially interesting in the current period of low and ultra-low interest rates.
Hieber, P.; Natolski, J.; Werner, R.: Fair valuation of cliquet-style return guarantees in (homogeneous and) heterogeneous life insurance portfolios. Scandinavian Actuarial Journal, 2019(6), 478-507, 2019. [Link] [SSRN]
Hieber, P.; Korn, R.; Scherer, M.: Analyzing the effect of low interest rates on the surplus participation of life insurance policies with different annual interest rate guarantees. European Actuarial Journal, 5(2), 11–28, 2015. [Link] [PDF]
First-passage time problems, ruin theory
The probability of a stochastic process to first breach an upper and/or a lower barrier level is an important quantity for optimal control and risk management. First-passage times have many applications for risk management and risk evaluation in Finance and Insurance, but also in different disciplines like Physics, Psychology, Hydrology or Biology. We derive first-passage time probabilities for a variety of processes, using efficient numerical schemes.
Sample path with upper and lower barrier.
Hieber, P.: First-passage times of regime switching models. Statistics & Probability Letters, 92, 148–157, 2014. [Link] [PDF]
Fernández, L., Hieber, P., Scherer, M.: Double-barrier first-passage times of jump-diffusion processes. Monte Carlo Methods and Applications, 19(2), 107–141, 2013. [Link] [PDF]
Hieber, P., Scherer, M.: A note on first-passage times of continuously time-changed Brownian motion. Statistics & Probability Letters, 82(1), 165–172, 2012. [Link] [PDF]
Hieber, P.; Scherer, M.: Efficiently pricing barrier options in a Markov-switching framework, Journal of Computational and Applied Mathematics, 235, 679–685, 2010. [Link] (open access)