Mathematical Reserves vs Longevity Risk in Life Insurances

Homa Magdalena ()
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Homa Magdalena: University of Wroclaw, Wroclaw, Poland

Econometrics. Advances in Applied Data Analysis, 2020, vol. 24, issue 1, 23-38

Abstract: Insurers wanting to provide protection against unforeseen losses should establish an appropriate level of reserves, which should balance the risk borne by the insurer so as to guarantee the financial security of the insured. The system including the financing requirements tailored to the real risks is called the Solvency II. According to that the valuation of classic life insurance should consider the real risk, which includes risk of death and the change in value of money over time. This method of calculating reserves does not ensure the protection of collected funds by aggregation and the individual risk of longevity, which may negatively affect the long-term financial stability of insurers as well as the level of financial security for the insured. Therefore, the aim of this paper is to modify the calculation methods and, above all, to correct reserves within the period of insurance, taking into account the current expectation of the future projected length.

Keywords: longevity risk; Solvency II; required mathematical premium reserves (search for similar items in EconPapers)
JEL-codes: C58 G17 G22 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:eaiada:v:24:y:2020:i:1:p:23-38:n:3

DOI: 10.15611/eada.2020.1.03

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