Reserve-dependent Management Actions in life insurance

Debbie Kusch Falden and Anna Kamille Nyegaard

Scandinavian Actuarial Journal, 2023, vol. 2023, issue 1, 1-19

Abstract: In a set-up of with-profit life insurance including bonus, we study the calculation of the market reserve, where Management Actions such as investment strategies and bonus allocation strategies depend on the reserve itself. Since the amount of future bonus depends on the retrospective savings account, the introduction of Management Actions that depend on the prospective market reserve results in an entanglement of retrospective and prospective reserves. We study the complications that arise due to the interdependence between retrospective and prospective reserves, and characterize the market reserve by a partial differential equation (PDE). We reduce the dimension of the PDE in the case of linearity, and furthermore, we suggest an approximation of the market reserve based on the forward rate. The quality of the approximation is studied in a numerical example.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/03461238.2022.2061868 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:sactxx:v:2023:y:2023:i:1:p:1-19

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/sact20

DOI: 10.1080/03461238.2022.2061868

Access Statistics for this article

Scandinavian Actuarial Journal is currently edited by Boualem Djehiche

More articles in Scandinavian Actuarial Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().