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ESTIMATION OF FUTURE DISCRETIONARY BENEFITS IN TRADITIONAL LIFE INSURANCE

Published online by Cambridge University Press:  06 September 2022

Florian Gach  and
Simon Hochgerner Open the ORCID record for Simon Hochgerner [Opens in a new window]
Florian Gach
Affiliation:
Austrian Financial Market Authority (FMA) Otto-Wagner Platz 5, A-1090 Vienna, Austria E-mail: [email protected]
Simon Hochgerner*
Affiliation:
Austrian Financial Market Authority (FMA) Otto-Wagner Platz 5, A-1090 Vienna, Austria E-mail: [email protected]
*
E-mail: [email protected]
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Abstract

In the context of life insurance with profit participation, the future discretionary benefits (FDB), which are a central item for Solvency II reporting, are generally calculated by computationally expensive Monte Carlo algorithms. We derive analytic formulas to estimate lower and upper bounds for the FDB. This yields an estimation interval for the FDB, and the average of lower and upper bound is a simple estimator. These formulae are designed for real world applications, and we compare the results to publicly available reporting data.

Keywords

Solvency IIfuture discretionary benefitsmarket consistent valuation
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 52 , Issue 3 , September 2022 , pp. 835 - 876
Copyright
© The Author(s), 2022. Published by Cambridge University Press on behalf of The International Actuarial Association

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Footnotes

Disclaimer. The opinions expressed in this article are those of the authors and do not necessarily reflect the official position of the Austrian Financial Market Authority.

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