093079 (E53) The use of capital bonus policy and investment policy in the control of solvency for with-profits life insurance companies in the UK : Chadburn R.G., Actuarial Research Paper N°95, Department of Actuarial Science and Statistics, City University, UK, 1997

• Publisher: Elsevier Science
• Year: 1997
• Tongue: English
• Weight: 86 KB
• Volume: 20
• Category: Article
• ISSN: 0167-6687
• DOI: 10.1016/s0167-6687(97)89232-3

✦ Synopsis

A unit-linked life insurance contract is a contract where the insurance benefits depend on the price of some specific traded stocks. We consider a model describing the uncertainty of the financial market and a portfolio of insured individuals simultaneously. Due to incompleteness the insurance claims cannot be hedged completely by trading stocks and bonds only, leaving some risk to insurer. The theory of risk-minimization is briefly reviewed and applied after a change of measure. Risk-minimizing trading strategies and the associated intrinsic risk processes are determined for different types of unit-linked contracts. By extending the model to the situation where certain reinsurance contracts on the insured lives traded, the direct insurer can eliminate the risk completely. The corresponding self-financing strategies are determined.