Care-dependent tontines (Q2172030)

The paper deals with novel ways of combining long-term care business with retirement tontines, which transfer a part of longevity risk to policyholders and allow increased payments in care-dependent state. After introducing the transition probabilities involving the policyholder's health condition, the optimal payoffs of the care-dependent tontines are obtained in two different directions, then obtaining the optimal payoffs as well as the corresponding utility of each product with actuarially fair premiums on a net basis. Moreover, the realistic risk loadings are considered, and the attractiveness of the care-dependent tontines and care-dependent annuities are investigated under a realistic setting. The different three different care-dependent products considered in the paper are compared through a numerical analysis. Technical details and proofs are contained in the appendix.