Retrospective Reserves and Bonus with Policyholder Behavior

28 Pages Posted: 8 May 2020

See all articles by Debbie Falden

Debbie Falden

University of Copenhagen

Anna Kamille Nyegaard

University of Copenhagen

Date Written: April 14, 2020

Abstract

Legislation imposes insurance companies to project their assets and liabilities. Within the setup of with-profit life insurance, we consider retrospective reserves and bonus, and we study projection of balances with and without policyholder behavior. The projection resides in a system of ordinary differential equations of the savings account and the surplus, and we include the policyholder behavior options surrender and conversion to free-policy. The inclusion results in a structure where a system of ordinary differential equations of the savings account and the surplus is non-trivial. We consider a case, where we are able to find accurate ordinary differential equation and suggest an approximation method to project the savings account and the surplus including policyholder behavior in general.

Keywords: Retrospective Reserves, Bonus, Policyholder Behavior, FMA, Dividends, With-profit Insurance

JEL Classification: G22

Suggested Citation

Falden, Debbie and Nyegaard, Anna Kamille, Retrospective Reserves and Bonus with Policyholder Behavior (April 14, 2020). Available at SSRN: https://ssrn.com/abstract=3575544 or http://dx.doi.org/10.2139/ssrn.3575544

Debbie Falden (Contact Author)

University of Copenhagen ( email )

Universitetsparken 5
Copenhagen, DK-2100
Denmark

Anna Kamille Nyegaard

University of Copenhagen ( email )

Universitetsparken 5
Copenhagen ?, DK-2100
Denmark

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