DENMARK - Two Danish researchers have modelled the bonus-crediting mechanism of with-profits policies issued by Danish pensions providers.

Anders Grosen of the Aarhus School of Business and Peter Lochte of the University of Aarhus have created an empirical analysis of the bonus crediting mechanism of Danish pensions and life assurance companies.

“This paper develops and estimates a model for the bonus-crediting mechanism in relation to with-profits policies issued by Danish life insurance and pensions companies,” says an abstract of their research on the Journal of Pension Economics and Finance website.

They note that the market for pension and life insurance savings contracts is “generally highly opaque”. But their proposed model explains a significant part of the variation in actual bonus distribution by Danish market participants, the researchers say. They have compiled a unique data set that contains information compiled from public and non-public sources covering the 1991-2000 period.