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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
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.
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- Copyright © Institute and Faculty of Actuaries 1989
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