Description: In this article, a numerical comparison of two commonly used FIA valuation methodologies is conducted to help insurers decide on the best methodology to use under GAAP LDTI and VM-22. We compared two modeling approaches to project the future index credits with the annual point-to-point crediting formula: Tthe stochastic equity crediting model and the deterministic option budget crediting model. The analysis is then extended to different levels of option budgets and the monthly average crediting formula. The advantages and disadvantages of the two equity return projecting approaches are also highlighted and will be discussed later in the report.

Description: it discusses the framework and modeling of the market consistent valuation of fixed indexed annuity, against the backdrop of the convergence of accounting standards and internal risk management.

Description: Here we are led to draw a distinction between “wild” markets and “free” markets. A wild market is unregulated and unscrutinized. Information flows are purposely impeded for competitive reasons and reduced to trickles from rumor and espionage. No one knows what anyone else is doing, and pricing is blind and haphazard. In such a market, there are no safeguards against anticompetitive behavior and no guarantees that the market will clear. The only guarantee is that there will be liquidity crises.

Description: This paper applies the research in Prospect Theory of Kahneman and Tversky to explain why sales of annuities lag sales of life insurance products. The author theorizes that life insurance is easier to sell because customers perceive themselves to be in the domain of losses, while potential annuity customers perceive themselves to be in the domain of gains. Kahneman and Tversky showed us that people are mostly risk averse in the domain of gains and risk seeking in the domain of losses. Purchase of an annuity or life product is a risky investment. Customers will find it easier to take the risk in the life insurance domain of losses than the annuity domain of gains. The author then proposes a hybrid life annuity product that might address both mortality and longevity risk in one product that would allow both products to be more competitive than stand-alone products.

Description: Access the most current issue, as well as back issues, of Risk Management Newsletter.

Description: Results of the 2020 survey on the effects of the Pandemic

Description: This newsletter provides a regulation outlook for the use of AI/ML in insurance industry, interpretations of regulatory expectations and what insurers should consider when managing risks associated with the development, implementation and use of AI/ML models/tools.

Description: This is the SOA website page displaying the table of contents for Risk Management: The Current Financial Crisis, Lessons Learned and Future Implications series of essays.

Description: Life and annuity markets around the world have seen increasingly complex investment-combined products, including universal life, fixed indexed annuities, variable annuities with a wide variety of guaranteed benefits and indexed variable annuities. Insurance companies are facing unprecedented exposure to financial risks in addition to traditional mortality and longevity risks. The risk assessment and modeling for such complex designs by conventional methods often focus heavily on their market competitiveness and profitability. However, there seems to be a lack of quantifiable and systematic approaches to assess investment risks associated with investment combined products. The objective of the proposed work is to develop a framework for quantifying and analyzing various forms of contractual designs and showcase different techniques to assess the trade-off between competitive contractual designs and their practical implications regarding the difficulty of risk management.

Description: This article discusses the problems created by the options in unit-linked annuities in the UK, variable annuities in the US and segregated fund contracts in Canada. Methodology for valuing the guaranteed annuity option is presented.