Description: This is a continuation of a discussion about the the theoretically correct treatment of the credit put the policyholder writes when purchasing an insurance contract.

Description: A discussion of the American Financial case in detail. Also includes background on what the statute requires and the Internal Revenue Service (IRS)’s ruling and litigating positions.

Description: This article discusses the current state of the IAIS' initiative on their group Insurance Capital Standard.

Description: The author uses a generalized asset risk model to explore C1 risk, drawing heavily from investment theory and pension fund management, applying these to an insurance general account. This article has two parts the first part, contained in this issue of Risk and Reward, describes the basic C1 model itself. The second part, which will be published in the next issue of Risks and Rewards, discusses various implications of the basic C1 model, especially related to managing the company’s investment portfolio.

Description: “It’s interesting to note that, given the past year’s reversal of fortunes in the stock markets, all the media rap about heated inquiries around back-dating options has stopped.”

Description: This article explores the effectiveness of hedging delta and rho of equity options. This provides insight into the frequency and severity of losses due to not hedging volatility risk or other higher order risks. 10yr-equity put option strategies were chosen to represent the risk of hedging guaranteed benefits attached to variable annuities, while 1-yr put and call strategies were modeled to investigate the risk of hedging equity index interest credited to fixed indexed annuities. In both cases, the value of the option was compared to the value of delta/rho hedges in the tail of both actual historical and simulated scenarios for equity returns and volatilities. The historical path of interest rates and equities was generally used to highlight the hedge impact for different implied volatility assumptions in each example.

Description: Derives appropriate hedge ratios for CPPI strategies, taking into account discrete hedge times and market dislocations (gap risk).

Description: Proposes alternatives for estimating the long term interest returns in Indexed Universal Life products. Defends expected return of 20%-45% on hedge budgets.

Description: Discuss different approaches of XXX and AXXX relief solutions

Description: Book review of: Social Science from the Bottom Up, by Joshua M. Epstein and Robert Axtell