Description: 2021 Life Meeting - Session 7D: Emerging Trends in Lapse and Mortality for Life Products 9.1.21 Recording

Description: ALM and hedging can reap significant benefits from innovation in computation and operations research. Explore applications of static and dynamic optimization in two different ALM and hedging use cases. Insurers are increasingly moving offshore by establishing Bermuda captive reinsurers. In calculating the Bermuda Best Estimate Liability ('BEL'), reinsurers will need to segment assets to support liabilities in each treaty. A Linear Programming ('LP') problem can be formulated to tactically select assets in a way that minimizes the BEL and consequently the total asset requirement. Learn more about what US Variable Annuity Insurers face with the regulatory requirement to reflect 'future hedging strategy' in their statutory funding calculation. The traditional numerical method of finding the optimal hedging target and then allocating assets may encounter the curse of dimensionality with expanding product and economic environment complexity. A Reinforcement Learning algorithm may well fit this problem and provide insurers a solution for dynamic hedging.