The IASB Insurance Project for Life Insurance Contracts: Impact on Reserving Methods and Solvency Requirements

Posted: 3 Nov 2005 Last revised: 24 Aug 2014

See all articles by Laura Ballotta

Laura Ballotta

Sir John Cass Business School - City, University of London

Giorgia Esposito

University of Rome I - Department of Actuarial and Financial Sciences

Steven Haberman

City University London - Faculty of Actuarial Science

Date Written: May 1, 2005

Abstract

In this communication, we review the fair value - based accounting framework promoted by the IASB Insurance Project for the case of a life insurance company. In particular, by means of a simple participating contract with minimum guarantee, we compare the fair value approach with the "traditional" accounting system based on the construction of mathematical reserves, and we assess the adequacy of the two reporting frameworks in terms of covering of the liability, implementation cost, volatility of reported earnings and solvency capital requirements.

Keywords: Black-Scholes option pricing formula, fair value, L'evy processes, mathematical reserves, participating contracts, shortfall probability, solvency requirements

JEL Classification: G13, G22, M41, M44

Suggested Citation

Ballotta, Laura and Esposito, Giorgia and Haberman, Steven, The IASB Insurance Project for Life Insurance Contracts: Impact on Reserving Methods and Solvency Requirements (May 1, 2005). Insurance: Mathematics and Economics, Vol. 39, No. 3, 2006. Available at SSRN: https://ssrn.com/abstract=829824

Laura Ballotta

Sir John Cass Business School - City, University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

HOME PAGE: http://www.city.ac.uk/people/academics/laura-ballotta

Giorgia Esposito (Contact Author)

University of Rome I - Department of Actuarial and Financial Sciences ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

Steven Haberman

City University London - Faculty of Actuarial Science ( email )

London
United Kingdom

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