Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-04T18:38:51.225Z Has data issue: false hasContentIssue false

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.

Type
Research Article
Copyright
Copyright © Institute and Faculty of Actuaries 1989

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

(1) Fine, A. E. M., Headdon, C. P., Hewitson, T. W., Johnson, C. M., Lumsden, I. C., Maple, M. H., O'Keeffe, P. J. L., Pook, P. J., Purchase, D. E. & Robinson, D. G. (1988). Proposals for the Statutory Basis of Valuation of the Liabilities of Linked Long-term Insurance Business. J.I.A. 115, 555 and T.F.A. (in preparation).Google Scholar
(2) Cannon, C. L. (1985). Valuation Requirements: Bases and Methods. Proceedings of the First U.K. Actuarial Convention, 76.Google Scholar
(3) Faculty Of Actuaries Working Party (1986). The Solvency of Life Assurance Companies. A Report, T.F.A. 39, 251.Google Scholar
(4) Wilkie, A. D. (1986). A Stochastic lnvestment Model for Actuarial Use. T.F.A. 39, 341.Google Scholar
(5) Benjamin, S., Ford, A., Gillespie, R. G., Hager, D. P., Loades, D. H., Rowe, B. N., Ryan, J. P., Smith, P. & Wilkie, A. D. (1980) Report of the Maturity Guarantees Working Party, J.I.A. 107, 103.Google Scholar
(6) Corley, R. D. (1988). Making Sense of the Future. Presidential Address to the Institute of Actuaries. J.I.A. 116, 9.Google Scholar
(7) Johnston, E. A. (1988). The Appointed Actuary. J.I.A. 116, 27 and T.F.A. (in preparation).Google Scholar
(8) Elliott, S. F. (1988). Some Aspects of the Statutory Valuation, J.S.I.A.S. 31, 127.Google Scholar