Defined terms for the annuity market and lifetime income landscape.
Rising rate environment effects on annuity pricing are the changes in payout rates on newly issued contracts, mark-to-market position of existing bond portfolios, and in-force contract dynamics that occur when prevailing nominal interest rates move higher over a sustained period.
Risk classification is the practice of assigning participants in a lifetime income arrangement to priced classes based on characteristics that predict their expected experience, with each class priced to the class-average expectation rather than to each individual's specific risk profile.
Risk pooling is the arrangement in which a group of individuals combines their exposure to a shared uncertainty so that the actual cost is borne by the group as a whole and is more predictable for each member than it would be for any one person alone.
Risk sharing in the ergodicity context is the mechanism, identified in Ole Peters' ergodicity economics, by which agents who would each face a non-ergodic outcome alone pool their realized outcomes so that each member's time-average experience converges on the ensemble average.
