Modeling the Future Value Distribution of a Life Insurance Portfolio

Massimo Costabile and Fabio Viviano
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Massimo Costabile: Department of Economics, Statistics and Finance, University of Calabria, Ponte Bucci Cubo 0 C, 87036 Rende, CS, Italy
Fabio Viviano: Department of Economics and Statistics, University of Udine, Via Tomadini 30/A, 33100 Udine, Italy

Risks, 2021, vol. 9, issue 10, 1-17

Abstract: This paper addresses the problem of approximating the future value distribution of a large and heterogeneous life insurance portfolio which would play a relevant role, for instance, for solvency capital requirement valuations. Based on a metamodel, we first select a subset of representative policies in the portfolio. Then, by using Monte Carlo simulations, we obtain a rough estimate of the policies’ values at the chosen future date and finally we approximate the distribution of a single policy and of the entire portfolio by means of two different approaches, the ordinary least-squares method and a regression method based on the class of generalized beta distribution of the second kind. Extensive numerical experiments are provided to assess the performance of the proposed models.

Keywords: GB2; LSMC; metamodel; regression models; Solvency II (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:9:y:2021:i:10:p:177-:d:648693

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