IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2310.16927.html
   My bibliography  Save this paper

On Technical Bases and Surplus in Life Insurance

Author

Listed:
  • Oytun Hac{c}ar{i}z
  • Torsten Kleinow
  • Angus S. Macdonald

Abstract

We revisit surplus on general life insurance contracts, represented by Markov models. We classify technical bases in terms of boundary conditions in Thiele's equation(s), allowing more general regulations than Scandinavian-style `first-order/second-order' regimes, and replacing the traditional retrospective policy value. We propose a `canonical' model with three technical bases (premium, valuation, accumulation) and show how each pair of bases defines premium loadings and surplus. Along with a `true' or `real-world' experience basis, this expands fundamental results of Ramlau-Hansen (1988a). We conclude with two applications: lapse-supported business; and the retrospectively-oriented regime proposed by M{\o}ller & Steffensen (2007).

Suggested Citation

  • Oytun Hac{c}ar{i}z & Torsten Kleinow & Angus S. Macdonald, 2023. "On Technical Bases and Surplus in Life Insurance," Papers 2310.16927, arXiv.org.
    • Handle: RePEc:arx:papers:2310.16927
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2310.16927
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Julian Jetses & Marcus C. Christiansen, 2022. "A general surplus decomposition principle in life insurance," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2022(10), pages 901-925, November.
    2. P. Linnemann, 2003. "An Actuarial Analysis of Participating Life Insurance," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2003(2), pages 153-176.
    3. Møller,Thomas & Steffensen,Mogens, 2007. "Market-Valuation Methods in Life and Pension Insurance," Cambridge Books, Cambridge University Press, number 9780521868778, June.
    4. Craig Turnbull, 2017. "A History of British Actuarial Thought," Springer Books, Springer, number 978-3-319-33183-6, March.
    5. Ragnar Norberg, 1999. "A theory of bonus in life insurance," Finance and Stochastics, Springer, vol. 3(4), pages 373-390.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ragnar Norberg, 2013. "Optimal hedging of demographic risk in life insurance," Finance and Stochastics, Springer, vol. 17(1), pages 197-222, January.
    2. Julian Jetses & Marcus C. Christiansen, 2021. "A General Surplus Decomposition Principle in Life Insurance," Papers 2111.12967, arXiv.org.
    3. Ninna Reitzel Jensen & Kristian Juul Schomacker, 2015. "A Two-Account Life Insurance Model for Scenario-Based Valuation Including Event Risk," Risks, MDPI, vol. 3(2), pages 1-36, June.
    4. Buchardt, Kristian, 2014. "Dependent interest and transition rates in life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 55(C), pages 167-179.
    5. Jamaal Ahmad & Kristian Buchardt & Christian Furrer, 2020. "Computation of bonus in multi-state life insurance," Papers 2007.04051, arXiv.org, revised Nov 2023.
    6. Marcus C. Christiansen, 2021. "Time-dynamic evaluations under non-monotone information generated by marked point processes," Finance and Stochastics, Springer, vol. 25(3), pages 563-596, July.
    7. Marcus C. Christiansen & Christian Furrer, 2020. "Dynamics of state-wise prospective reserves in the presence of non-monotone information," Papers 2003.02173, arXiv.org, revised Jan 2021.
    8. Kallestrup-Lamb, Malene & Søgaard Laursen, Nicolai, 2024. "Longevity hedge effectiveness using socioeconomic indices," Insurance: Mathematics and Economics, Elsevier, vol. 114(C), pages 242-251.
    9. Debbie Kusch Falden & Anna Kamille Nyegaard, 2021. "Retrospective Reserves and Bonus with Policyholder Behavior," Risks, MDPI, vol. 9(1), pages 1-28, January.
    10. Christiansen, Marcus C. & Djehiche, Boualem, 2020. "Nonlinear reserving and multiple contract modifications in life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 187-195.
    11. 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.
    12. Marco Di Francesco & Roberta Simonella, 2023. "A stochastic Asset Liability Management model for life insurance companies," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(1), pages 61-94, March.
    13. Kristian Buchardt & Thomas Møller, 2018. "Hedging and Cash Flows in the Presence of Taxes and Expenses in Life and Pension Insurance," Risks, MDPI, vol. 6(3), pages 1-25, July.
    14. Møller, T., 2002. "On Valuation and Risk Management at the Interface of Insurance and Finance," British Actuarial Journal, Cambridge University Press, vol. 8(4), pages 787-827, October.
    15. Magdalena Homa, 2022. "The Impact of MT Strategies on Risk and Value Distribution of Unit-linked Insurance Portfolio," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 607-619.
    16. 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.
    17. Jarner, Søren Fiig & Kronborg, Morten Tolver, 2016. "Entrance times of random walks: With applications to pension fund modeling," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 1-20.
    18. Gerstner, Thomas & Griebel, Michael & Holtz, Markus, 2009. "Efficient deterministic numerical simulation of stochastic asset-liability management models in life insurance," Insurance: Mathematics and Economics, Elsevier, vol. 44(3), pages 434-446, June.
    19. Youssouf A. F. Toukourou & Franc{c}ois Dufresne, 2015. "ON Integrated Chance Constraints in ALM for Pension Funds," Papers 1503.05343, arXiv.org.
    20. Kei Fukuda & Akihiko Inoue & Yumiharu Nakano, 2007. "Optimal intertemporal risk allocation applied to insurance pricing," Papers 0711.1143, arXiv.org, revised Nov 2007.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:arx:papers:2310.16927. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.