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Reflections on resilience: some considerations of mismatching tests, with particular reference to non-linked long-term insurance business

Published online by Cambridge University Press:  20 April 2012

D. E. Purchase ,
A. E. M. Fine ,
C. P. Headdon ,
T. W. Hewitson ,
C. M. Johnson ,
I. C. Lumsden ,
M. H. Maple ,
P. J. L. O'Keeffe ,
P. J. Pook  and
D. G. Robinson
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Abstract

The paper considers the valuation for solvency purposes of traditional long-term insurance business. It concentrates on without-profit business, and discusses the reserves that are required to protect against the contingency of sudden adverse changes in asset values (the ‘mismatching’ or ‘resilience’ test). The details of a suitable test, and a method of applying it in practice using a ‘matching rectangle’, are described. Investigations into the effectiveness of such a test, using both deterministic and stochastic methods, are followed by concluding remarks on the underlying philosophical issues raised.

Full numerical results are presented in the Appendices.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 116 , Issue 3 , December 1989 , pp. 347 - 452
Copyright
Copyright © Institute and Faculty of Actuaries 1989

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References

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