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Old 07-22-2019, 09:11 AM
actuary_on_the_side actuary_on_the_side is offline
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Default Equity Index Annuity Participation Rate Calc?

I was wondering if there were any FIA (Fixed index annuity) pricing actuaries out there who could help me understand how the participation rate is calculated on an FIA product.

Say you have a given index (S&P 500 Daily Risk Control 5%). How would a carrier such as Nationwide arrive at a product that offers 40% of the upside potential to offer to the client? or how would they determine the spread?

Thanks
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Old 07-23-2019, 03:27 PM
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Numbers Nerd Numbers Nerd is offline
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It is not unlike pricing a fixed annuity. After all expenses, taxes, capital charges, etc. you have an amount you can credit to the policyholder. That is the amount you can then spend on options which will pay off in the fashion you have promised to the policyholder. The less generous the promise, the higher the participation rate.
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Old 07-29-2019, 03:27 PM
MathGeek92 MathGeek92 is offline
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Quote:
Originally Posted by actuary_on_the_side View Post
I was wondering if there were any FIA (Fixed index annuity) pricing actuaries out there who could help me understand how the participation rate is calculated on an FIA product.



Thanks
its just like numbers said. it comes down to how much does a company sets to spend on the options.

Participation rate is simply the option spend / option cost. If I set my option spend at 200 bps and the ATM option costs 500 bps then I get a 40% participation feature.
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