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The interaction of guarantees, surplus distribution, and asset allocation in with-profit life insurance policies. (English) Zbl 1273.91238
Summary: Traditional life insurance policies in many markets are sold with minimum interest rate guarantees. This paper concentrates on the risk cliquet-style guarantees impose on the insurer, measured by shortfall probabilities under the so-called “real-world probability measure \(P\)”. We develop a general model and analyze the impact of interest rate guarantees on the risk of an insurance company. Furthermore the paper is concerned with how default risk depends on characteristics of the contract, on the insurer’s reserve situation and asset allocation, and on management decisions as well as on regulatory parameters. In particular, the interaction of the parameters is analyzed yielding results that should be of interest for insurers as well as regulators.

MSC:
91B30 Risk theory, insurance (MSC2010)
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