Change search
ReferencesLink to record
Permanent link

Direct link
Market-consistent valuation of a pension product with guarantee in line with Solvency II: An applied case study to improve knowledge about how rationality and stressed conditions with respect to market- and insurance risk will impact the balance sheet.
Umeå University, Faculty of Science and Technology, Department of Mathematics and Mathematical Statistics.
Umeå University, Faculty of Science and Technology, Department of Mathematics and Mathematical Statistics.
2016 (English)Independent thesis Advanced level (professional degree), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Traditional pension products have today been replaced by products that are linked directly to the unit value of some kind of investment portfolio. These products contribute to more vulnerable situations for insurance companies in terms of uncertainties of future obligations. This master thesis aims to create a general valuation model in line with Solvency II regulation, which is able to value the best estimate of the insurance liability. The model will use a state model, stochastic scenario generator model and the Makeham function for estimating mortality intensity. An applied case study was conducted to evaluate how stressed market- and insurance conditions would impact the liability. Additional studies was performed to test how different degrees of rational behaviour among policyholders would impact the liability.  The policyholder population was fictitious and consisted of 100 policyholders. The results illuminated that the degree of rationality had a relative significant impact on the insurance company's liability, as opposed of what impact trends in longevity had on the best estimate in a separated stress test. On the other hand, when stress testing market risk and trend in longevity at the same time, the non-linearity risk was relatively high. The results of this thesis indicated the importance of studying risks in a combined case and not only separately, and also that higher degree of rational behaviour among policyholders could lead to an increase in surrender of profit generated policyholders which in turn affected the insurance liability.

Place, publisher, year, edition, pages
2016. , 59 p.
Keyword [en]
Risk management, Insurance, Best estimate, Valuation
National Category
Engineering and Technology
URN: urn:nbn:se:umu:diva-123141OAI: diva2:943441
External cooperation
Kidbrooke Advisory
Educational program
Master of Science in Engineering and Management
Available from: 2016-06-28 Created: 2016-06-27 Last updated: 2016-06-29Bibliographically approved

Open Access in DiVA

fulltext(3003 kB)54 downloads
File information
File name FULLTEXT01.pdfFile size 3003 kBChecksum SHA-512
Type fulltextMimetype application/pdf

By organisation
Department of Mathematics and Mathematical Statistics
Engineering and Technology

Search outside of DiVA

GoogleGoogle Scholar
Total: 54 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 129 hits
ReferencesLink to record
Permanent link

Direct link