Stochastic Pricing for Embedded Options in Life Insurance and Annuity Products

Research Projects – Life Insurance

The Product Development and Financial Reporting Sections have completed their research project examining stochastic pricing of embedded options found in life insurance and annuity products. The following report authored by a Milliman research team of Tim Hill, Dale Visser and Ricky Trachtman, investigates the challenges associated with determining a "fair value" assessment for embedded options in two product types and incorporates the process into product pricing.

The sponsors would like to thank the following individuals who served on the Project Oversight Group:

  • Bud Ruth, Chair
  • Claire Bilodeau
  • Eric Clapprood
  • Susan Deakins
  • Steve Largent
  • Jan Schuh
  • Ronora Stryker

Questions and comments may be directed to Ronora Stryker, SOA Research Actuary.