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The Actuary The magazine of the Institute & Faculty of Actuaries
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ARC research considers equity release mortgage calculations

New independent research jointly commissioned by the IFoA’s Actuarial Research Centre and the Association of British Insurers investigates alternative approaches for modelling cashflows for equity release mortgages. 

11 APRIL 2019 | THE ACTUARY TEAM 

©iStock
©iStock


The results of the research, carried out by the University of Kent, are detailed in ‘UK Equity Release Mortgages: a review of the No Negative Equity Guarantee’. The research results were presented and discussed at a launch event which took place 
at the end of February at Staple Inn Hall. 

A video recording of the event is available to view at bit.ly/ERMLaunch 

IFoA president Jules Constantinou said: “In light of the growing use of these products as investments underlying annuity portfolios by insurers, it is essential that insurers set aside adequate reserves and capital for the valuable guarantees they are offering under the products. As calculations around equity release mortgages are extremely complex, we felt the time was right to further research the models in use. 

“On commissioning this joint research, the IFoA and the ABI have sought to provide an independent, professional view on potential models for valuation, capital and pricing purposes. 

This report moves us significantly further forward in applying the latest sophisticated statistical methods for modelling the guarantees. 

“It is important to remember that different models are appropriate for different purposes.”