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-adjusted return is any return figure that has been modified to reflect the amount of risk taken to produce it, allowing investments with different risk profiles to be compared on a common basis rather than by return alone.
The risk aversion versus loss aversion distinction separates a preference for certainty over uncertainty of equal expected value (risk aversion) from an asymmetric response in which losses weigh more heavily than equivalent gains around a reference point (loss aversion).
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.
