Defined terms for the annuity market and lifetime income landscape.
Group self-annuitization is a pooled arrangement in which a group of individuals — typically a cohort of similar age and circumstance — collectively converts savings into lifetime income by sharing mortality experience, without transferring longevity risk to an insurer or sponsor.
Homogeneous versus heterogeneous pool is the distinction between a lifetime income pool whose members share similar mortality risk characteristics and one whose members differ substantially in those characteristics.
Idiosyncratic versus systematic risk in pooling is the distinction between longevity risk that varies independently across pool members and can be diversified in a large pool, and longevity risk that varies in common across all members and cannot be diversified no matter how large the pool.
A longevity pool is a risk-pooling arrangement specifically organized around the uncertainty of how long its members will live, in which the share of pool resources released by member deaths is redistributed to surviving members as lifetime income.
Lorenzo Tonti was the 17th-century Italian banker who proposed the pool-based lifetime income structure that bears his name, presented to French finance minister Cardinal Mazarin in 1653 as a mechanism for raising state funds.
