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2007 General Meeting Assemblée générale 2007 Montréal, Québec

Canadian Institute of Actuaries. L’Institut canadien des actuaires. 2007 General Meeting Assemblée générale 2007 Montréal, Québec. IP-37 Group Life Capital John Have, FSA, FCIA. Group Life Volatility. Volatility for Specfic SET S = 2.5 x A x B x E / F

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2007 General Meeting Assemblée générale 2007 Montréal, Québec

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  1. Canadian Institute of Actuaries L’Institut canadien des actuaires 2007 General Meeting Assemblée générale 2007 Montréal, Québec IP-37 Group Life Capital John Have, FSA, FCIA

  2. Group Life Volatility Volatility for Specfic SET S = 2.5 x A x B x E / F A – Std Dev next yr’s exp claims B – Max(ln(D1),1) of exp claims - for prem guar period E – Net amt at risk (Face – Reserve) F – Face Amt 2.5 is CTE(95%) ≈ Normal Dist 97.5% + margin (ie: ongoing risk)

  3. Standard Deviation Group Life b - certificate amount q - certificate mortality rate

  4. 2008 GL Approximations #1b but no q (no detail age and gender) C – next year’s expected claims F – total insurer amount

  5. 2008 GL Approximations #2 No detail q or b n – number of insured lives N – number expected deaths And k is evaluated from comparison SET

  6. Other 2008 GL Approximations #3 C, F and n known #4 Only C known

  7. Limitation on the use of K If number lives exceed comparison set must use intercompany value of K. Intercompany K will be developed by using detailed GL bill data from 6-8 insurers plus a margin. Allowed for both regular GL and AD&D K potential values of 1.25 to 2.50

  8. 2008 AD&D Volatility Approx k - from related GL portfolio

  9. Total Insurer Volatility Combined Volatility component for all basic death and AD&D products. - Both Group and Individual SETs

  10. Catastrophic Component Catastrophic Component for each SET E – net amount at risk F – face amount Use .10 if rate guaranteed >1 year

  11. Sample GL MCCSR Values 15,294 employees with $920 million coverage Reinsurance above $200K Expected claims (net of reinsurance) $1,132K A: STD of expected claims 325 MCCSR = 2.5 x A + .05 x claims 869 A: Using average b and q 256 K: 1.27 MCCSR: approx #1 859 MCCSR: approx #2 887 MCCSR: approx #3 1,240 MCCSR: approx #4 1,247 MCCSR: “39” approx 949 100% MCCSR before diversification adjustment

  12. Total Insurer MCCSR (100%) Combined Volatility and CAT component for all basic death and AD&D products. Both Group and Individual SETs The Catastrophic component is LINEAR BUT The Volatility component is GEOMETRIC

  13. GL VolatilityAttribution back to Group If we have 9 mortality SETs each with S = $10M Total S =30M or 33.3% of Sum individual Ss If we have 10 mortality SETs each with S = $10M Total S =31.6M or 31.6% of Sum individual Ss Do you you use: attribution ratio OR marginal basis for the last SET to be added?

  14. Future MCCSR Changes 2008 The changes in this document 2009 Reinsurance, negative reserves etc 2010-11? Stochastic modelling of Living Benefits (LTD, CI).

  15. Group Life Capital Any questions??

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