A Model for Risk Adjustment (IFRS 17) for Surrender Risk in Life Insurance-Reference-Cited by-同舟云学术

A Model for Risk Adjustment (IFRS 17) for Surrender Risk in Life Insurance

Published:2023-03-20 Issue:3 Volume:11 Page:62
ISSN:2227-9091
Container-title:Risks
language:en
Short-container-title:Risks

Author:

Carlehed Magnus¹^ORCID

Affiliation:

1. Department of Mathematics, Stockholm University, 106 91 Stockholm, Sweden

Abstract

We propose a model for risk adjustment, in the context of IFRS 17, for surrender risk. Surrender rates are assumed to follow a stochastic process, underpinned by data. The distribution of the present value of future individual cash flows is calculated. Using well-known techniques from the theory of convex ordering of stochastic variables, we present closed formula approximations of risk measures, such as quantiles, for the total portfolio. These formulas are easy to program and enable an insurance company to calculate its risk adjustment without time-consuming simulations.

Publisher

MDPI AG

Subject

Strategy and Management,Economics, Econometrics and Finance (miscellaneous),Accounting

Link

https://www.mdpi.com/2227-9091/11/3/62/pdf

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