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Modeling the Future Value Distribution of a Life Insurance Portfolio

Author

Listed:
  • Massimo Costabile

    (Department of Economics, Statistics and Finance, University of Calabria, Ponte Bucci Cubo 0 C, 87036 Rende, CS, Italy
    These authors contributed equally to this work.)

  • Fabio Viviano

    (Department of Economics and Statistics, University of Udine, Via Tomadini 30/A, 33100 Udine, Italy
    Department of Economics, Business, Mathematics and Statistics “B. de Finetti”, University of Trieste, Piazzale Europa 1, 34127 Trieste, Italy
    These authors contributed equally to this work.)

Abstract

This paper addresses the problem of approximating the future value distribution of a large and heterogeneous life insurance portfolio which would play a relevant role, for instance, for solvency capital requirement valuations. Based on a metamodel, we first select a subset of representative policies in the portfolio. Then, by using Monte Carlo simulations, we obtain a rough estimate of the policies’ values at the chosen future date and finally we approximate the distribution of a single policy and of the entire portfolio by means of two different approaches, the ordinary least-squares method and a regression method based on the class of generalized beta distribution of the second kind. Extensive numerical experiments are provided to assess the performance of the proposed models.

Suggested Citation

  • Massimo Costabile & Fabio Viviano, 2021. "Modeling the Future Value Distribution of a Life Insurance Portfolio," Risks, MDPI, vol. 9(10), pages 1-17, October.
    • Handle: RePEc:gam:jrisks:v:9:y:2021:i:10:p:177-:d:648693
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    References listed on IDEAS

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    Cited by:

    1. Anna Rita Bacinello, 2022. "Special Issue “Quantitative Risk Assessment in Life, Health and Pension Insurance”," Risks, MDPI, vol. 10(4), pages 1-2, March.

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    Keywords

    GB2; LSMC; metamodel; regression models; Solvency II;
    All these keywords.

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