Actuarial-consistency and two-step actuarial valuations: a new paradigm to insurance valuation

Karim Barigou (), Daniël Linders () and Fan Yang ()
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Karim Barigou: ISFA - Institut de Science Financière et d'Assurances, LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Daniël Linders: UvA - University of Amsterdam [Amsterdam] = Universiteit van Amsterdam
Fan Yang: University of Waterloo [Waterloo]

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Abstract: This paper introduces new valuation schemes called actuarial-consistent valuations for insurance liabilities which depend on both financial and actuarial risks, which imposes that all actuarial risks are priced via standard actuarial principles. We propose to extend standard actuarial principles by a new actuarial-consistent procedure, which we call ``two-step actuarial valuations". In the case valuations are coherent, we show that actuarial-consistent valuations are equivalent to two-step actuarial valuations. We also discuss the connection with ``two-step market-consistent valuations" from Pelsser and Stadje (2014). In particular, we discuss how the dependence structure between actuarial and financial risks impacts both actuarial-consistent and market-consistent valuations.

Keywords: Fair valuation; two-step valuation; actuarial consistent; market consistent; Solvency II; incomplete market (search for similar items in EconPapers)
Date: 2022
Note: View the original document on HAL open archive server: https://hal.science/hal-03327710v3
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Published in Scandinavian Actuarial Journal, inPress, ⟨10.1080/03461238.2022.2090272⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03327710

DOI: 10.1080/03461238.2022.2090272

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