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Analytical Validation Formulas for Best Estimate Calculation in Traditional Life Insurance

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  • Simon Hochgerner
  • Florian Gach

Abstract

Within the context of traditional life insurance, a model-independent relationship about how the market value of assets is attributed to the best estimate, the value of in-force business and tax is established. This relationship holds true for any portfolio under run-off assumptions and can be used for the validation of models set up for Solvency~II best estimate calculation. Furthermore, we derive a lower bound for the value of future discretionary benefits. This lower bound formula is applied to publicly available insurance data to show how it can be used for practical validation purposes.

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  • Simon Hochgerner & Florian Gach, 2018. "Analytical Validation Formulas for Best Estimate Calculation in Traditional Life Insurance," Papers 1802.07009, arXiv.org, revised Jul 2019.
    • Handle: RePEc:arx:papers:1802.07009
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    File URL: http://arxiv.org/pdf/1802.07009
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    Cited by:

    1. Manuel Hasenbichler & Wolfgang Muller & Stefan Thonhauser, 2023. "The Mean Field Market Model Revisited," Papers 2402.10215, arXiv.org.
    2. Florian Gach & Simon Hochgerner & Eva Kienbacher & Gabriel Schachinger, 2023. "Mean-field Libor market model and valuation of long term guarantees," Papers 2310.09022, arXiv.org, revised Nov 2023.
    3. Florian Gach & Simon Hochgerner, 2021. "Estimation of future discretionary benefits in traditional life insurance," Papers 2101.06077, arXiv.org, revised Jul 2022.
    4. Sascha Desmettre & Simon Hochgerner & Sanela Omerovic & Stefan Thonhauser, 2021. "A mean-field extension of the LIBOR market model," Papers 2109.10779, arXiv.org.

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