Managing demographic risk in enhanced pensions

This paper deals with demographic risk analysis in Enhanced Pensions, i.e. Long Term Care (LTC) insurance covers for retired. Both disability and longevity risks affect such a cover. Specifically, we concentrate on the risk of systematic deviations between projected and realised mortality and disability, adopting a multiple scenario approach. To this purpose we study the behaviour of the random risk reserve. Moreover, we analyse the effect of demographic risk on Risk-Based Capital requirements explaining how they can be reduced through either safety loading or capital allocation strategies. A profit analysis is also considered.