On Technical Bases and Surplus in Life Insurance
Abstract
We revisit surplus on general life insurance contracts, represented by Markov models. We classify technical bases in terms of boundary conditions in Thiele's equation(s), allowing more general regulations than Scandinavian-style `first-order/second-order' regimes, and replacing the traditional retrospective policy value. We propose a `canonical' model with three technical bases (premium, valuation, accumulation) and show how each pair of bases defines premium loadings and surplus. Along with a `true' or `real-world' experience basis, this expands fundamental results of Ramlau-Hansen (1988a). We conclude with two applications: lapse-supported business; and the retrospectively-oriented regime proposed by M{\o}ller & Steffensen (2007).
Keywords
Cite
@article{arxiv.2310.16927,
title = {On Technical Bases and Surplus in Life Insurance},
author = {Oytun Haçarız and Torsten Kleinow and Angus S. Macdonald},
journal= {arXiv preprint arXiv:2310.16927},
year = {2023}
}
Comments
33 pages, 4 Figures