IDEAS home Printed from https://ideas.repec.org/a/bla/jrinsu/v76y2009i4p909-931.html
   My bibliography  Save this article

The Distributions of Policy Reserves Considering the Policy-Year Structures of Surrender Rates and Expense Ratios

Author

Listed:
  • Chenghsien Tsai
  • Weiyu Kuo
  • Derek Mi-Hsiu Chiang

Abstract

In this article, we examine how the policy-year structures of expense ratios and surrender rates affect the distributions of policy reserves. Our results show that a convex expense ratio curve, though reduces the mean and the uncertainty of reserves, could make the beneficial impact of surrenders on insurers become detrimental. Our results also show that the convexity of the surrender rate curve is favorable to insurers while the volatilities of surrender rates are unfavorable. We further find that neglecting the policy-year structures of surrender rates and expense ratios may result in overestimation of the mean and the uncertainty of reserves. Copyright (c) The Journal of Risk and Insurance, 2009.

Suggested Citation

  • Chenghsien Tsai & Weiyu Kuo & Derek Mi-Hsiu Chiang, 2009. "The Distributions of Policy Reserves Considering the Policy-Year Structures of Surrender Rates and Expense Ratios," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(4), pages 909-931.
  • Handle: RePEc:bla:jrinsu:v:76:y:2009:i:4:p:909-931
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1539-6975.2009.01324.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Beekman, John A. & Fuelling, Clinton P., 1990. "Interest and mortality randomness in some annuities," Insurance: Mathematics and Economics, Elsevier, vol. 9(2-3), pages 185-196, September.
    2. Marceau, Etienne & Gaillardetz, Patrice, 1999. "On life insurance reserves in a stochastic mortality and interest rates environment," Insurance: Mathematics and Economics, Elsevier, vol. 25(3), pages 261-280, December.
    3. Parker, Gary, 1994. "Limiting Distribution of the Present Value of a Portfolio," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 24(01), pages 47-60, May.
    4. Parker, Gary, 1996. "A portfolio of endowment policies and its limiting distribution," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 26(01), pages 25-33, May.
    5. Tsai, Chenghsien & Kuo, Weiyu & Chen, Wei-Kuang, 2002. "Early surrender and the distribution of policy reserves," Insurance: Mathematics and Economics, Elsevier, vol. 31(3), pages 429-445, December.
    6. De Schepper, A. & Goovaerts, M., 1992. "Some further results on annuities certain with random interest," Insurance: Mathematics and Economics, Elsevier, vol. 11(4), pages 283-290, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Eling & Michael Kochanski, 2013. "Research on lapse in life insurance: what has been done and what needs to be done?," Journal of Risk Finance, Emerald Group Publishing, vol. 14(4), pages 392-413, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jrinsu:v:76:y:2009:i:4:p:909-931. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/ariaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.