The Influence of Demographic and Economic Factors on the Widow’s Reverse Annuity Benefits in Coronavirus Pandemic

Abstract The COVID-19 pandemic has affected many areas of society and the economy. In the epidemiological field, it has significantly increased mortality, especially in the elderly population. It has greatly affected the real estate and financial market. The price of housing, inflation, and interest rates rose. Therefore, housing is currently unaffordable. The analysis of the Life Expectancy Tables jumped to a higher risk of death for men than for women. The pandemic has made women more likely to be widowed than men, and more often, while their economic and social status has worsened. Higher mortality rates have an impact on the cash flow associated with insurance and reverse annuity contracts. Reverse annuity benefits also depend on the value of property and the interest rate. This article analyses the impact of higher mortality rates, property values, and interest rates on annuity benefits for widows. The actuarial value of the life annuity is used on the calculation of benefits. The interest rate is modelled using the Svensson model of spot interest and the 3m WIBOR. Financial mathematics for life insurance and demographic methods are used.