Description: New Zealand is about to launch its first variable annuity with guaranteed lifetime withdrawal benefits. The product design is mindful of the lessons from the financial crisis in the United States, Europe and Japan.

Description: This paper demonstrates that extreme value theory (EVT) can be used as a tool to model policyholder behavior in the extreme tail. This paper applies EVT to the study of variable annuity dynamic lapse behavior in the extreme tail. It illustrates a process whereby a company can fully model policyholder behavior, including the extreme tail, with existing data. No judgment about the extremal behavior is necessary.