Description: In this paper, chapter III of the 1987 Valuation Actuary Handbook, the authors discuss building a liability model to evaluate the C-3 risk. The article discusses the data and assumptions needed, and the importance of sensitivity testing given that the model results are very sensitive to the assumptions used.

Description: There are two main techniques for evaluating the financial impact of interest rate movements on insurance companies: duration measures and computer simulations. In many ways these approaches provide complementary viewpoints.