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A theory of bonus in life insurance

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  • Ragnar Norberg

    ()
    (Laboratory of Actuarial Mathematics, Universitetsparken 5, DK-2100 Copenhagen û, Denmark)

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    Abstract

    The issue of bonus in life insurance is considered in a model framework where the traditional set-up is extended by letting the experience basis (mortality, interest, etc.) be stochastic. A novel definition of the technical surplus on an insurance contract is proposed, and basic principles for its repayment as bonus are discussed. Making the experience basis an endogenous part of the model opens possibilities of model-based prognostication of future bonuses. Numerical illustrations are provided.

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    Bibliographic Info

    Article provided by Springer in its journal Finance and Stochastics.

    Volume (Year): 3 (1999)
    Issue (Month): 4 ()
    Pages: 373-390

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    Handle: RePEc:spr:finsto:v:3:y:1999:i:4:p:373-390

    Note: received: January 1998; final version received: September 1998
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    Web page: http://www.springerlink.com/content/101164/

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    Related research

    Keywords: Safety margins; prospective reserves; retrospective reserves; stochastic interest; stochastic mortality; counting processes;

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    Cited by:
    1. Asmussen, Soren & Moller, Jakob R., 2003. "Risk comparisons of premium rules: optimality and a life insurance study," Insurance: Mathematics and Economics, Elsevier, vol. 32(3), pages 331-344, July.
    2. Tenorio Villalón, Ángel F. & Martín Caraballo, Ana M. & Paralera Morales, Concepción & Contreras Rubio, Ignacio, 2013. "Ecuaciones diferenciales y en diferencias aplicadas a los conceptos económicos y financieros || Differential and Difference Equations Applied to Economic and Financial Concepts," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative M, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 16(1), pages 165-199, December.
    3. Dahl, Mikkel, 2004. "Stochastic mortality in life insurance: market reserves and mortality-linked insurance contracts," Insurance: Mathematics and Economics, Elsevier, vol. 35(1), pages 113-136, August.
    4. Ragnar Norberg, 2013. "Optimal hedging of demographic risk in life insurance," Finance and Stochastics, Springer, Springer, vol. 17(1), pages 197-222, January.
    5. Buchardt, Kristian, 2014. "Dependent interest and transition rates in life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 167-179.

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