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Participating life insurances in an equity-Libor market model

Author

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  • Hainaut, Donatien

    (Université catholique de Louvain, LIDAM/ISBA, Belgium)

  • Devineau , Laurent

Abstract

This article introduces an equity-LIBOR Market Model (LMM) that integrates the investment strategy into the valuation process of participating life insurance policies. Within this framework, we consider bond portfolios rebalanced across multiple maturities and provide a semi-analytical formula for approximating the fair value of liabilities. We then investigate the impact of the investment policy on the net asset value and the Solvency Capital Requirement. To carry out this analysis, we propose a Monte Carlo method for generating sample paths under both LIBOR and real measures, alongside an estimation procedure under the real measure. The numerical illustration focuses on the asset-liability management of an endowment and a life annuity.

Suggested Citation

  • Hainaut, Donatien & Devineau , Laurent, 2025. "Participating life insurances in an equity-Libor market model," LIDAM Reprints ISBA 2025017, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    • Handle: RePEc:aiz:louvar:2025017
    DOI: https://doi.org/10.1007/s13385-025-00414-x
    Note: In: European Actuarial Journal, 2025, vol. 15 (2), p. 381-415
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