Mortality credits within large survivor funds

Denuit, Michel [UCL] Hieber, Peter [UCL] Robert, Christian Y.

Survivor funds are financial arrangements where participants agree to share the proceeds of a collective investment pool in a pre-described way depending on their survival. This offers investors a way to benefit from mortality credits, boosting financial returns. Following Denuit (2019), participants are assumed to adopt the conditional mean risk sharing rule introduced in Denuit and Dhaene (2012) to assess their respective shares in mortality credits. This paper considers the case of a large pool and studies the asymptotic behavior of mortality credits. A law of large numbers and a central-limit theorem are established, as well as simple approximations for a sufficiently large number of participants. A risk transfer network structure is also proposed to allow participants to restrict sharing to a community of individuals with whom they are connected. Lifelong incomes can be obtained by combining investments in survivor funds over consecutive periods, offering an alternative to modern tontines or pooled annuity funds.