Advertisement

European Actuarial Journal

, Volume 8, Issue 1, pp 9–25 | Cite as

Asset-liability management for long-term insurance business

  • Hansjörg Albrecher
  • Daniel Bauer
  • Paul Embrechts
  • Damir Filipović
  • Pablo Koch-Medina
  • Ralf Korn
  • Stéphane Loisel
  • Antoon Pelsser
  • Frank Schiller
  • Hato Schmeiser
  • Joël Wagner
Original Research Paper
First Online:
Received:
Accepted:
  • 196 Downloads

Abstract

This is a summary of the main topics and findings from the Swiss Risk and Insurance Forum 2017. That event gathered experts from academia, insurance industry, regulatory bodies, and consulting companies to discuss past and current developments as well as future perspectives in dealing with asset-liability management for long-term insurance business. Topics include valuation, innovations in insurance products, investment, and modelling aspects.

This is a preview of subscription content, log in to check access.

Notes

Acknowledgements

We thank Stephan Schreckenberg for suggesting the format of the conference, and for his critical and active support in the creation of the Swiss Risk and Insurance Forum. We thank all participants for the stimulating and lively discussion: Albrecher Hansjörg, University of Lausanne; Bailly Alexis, Moody’s Analytics; Daniel Bauer, University of Alabama; Embrechts Paul, ETH Zurich and Swiss Finance Institute; Filipovic Damir, EPFL and Swiss Finance Institute; Germann Hansjörg, Zurich Insurance; Grützner Guido, QuantAkt; Guerin Jean-Francois, Swiss Life; Harrison Glenn, Georgia State University; Jäger Jan, Swiss Re; Jaschke Stefan, Infinada; Joos Pierre, Allianz; Jorgensen Peter Lochte, University of Aarhus; Kalberer Tigran, Milliman; Keller Philipp, Deloitte; Koch Pablo, University of Zurich; Korn Ralf, TU Kaiserslautern; Kunz Andreas, Munich Re; Leukert Renate, Swiss Re; Loisel Stéphane, Université Lyon 1; Moeller Thomas, PFA and University of Copenhagen; Pelsser Antoon, Maastricht University; Popp Markus, Munich Re; Schätti Guido, Swiss Re; Schiller Frank, Munich Re; Schmeiser Hato, University of St. Gallen; Schmutz Michael, Finma and University of Bern; Schreckenberg Stephan, Swiss Re; Singh Raj, Standard Life; Smith Andrew, Deloitte; Steiger Gallus, Swiss Re; Tommasina Tancredi, Swiss Life; Wagner Joël, University of Lausanne; Weber Frank, PwC; Werner Ralf, University of Augsburg; Wilson Tom, Allianz. The Swiss Risk and Insurance Forum 2017 received financial support from Swiss Re, Swiss Life, the Swissquote Chair in Quantitative Finance at EPFL, the ETH Risk Centre and RiskLab, the Center for Finance and Insurance at the University of Zurich and the Department of Actuarial Science of the University of Lausanne.

References

  1. 1.
    Albrecher H, Eisele K, Steffensen M, Wüthrich MV (2017) A framework for cost-of-capital rate analysis in insurance. University of Lausanne, Lausanne (preprint) Google Scholar
  2. 2.
    Albrecher H, Embrechts P, Filipovic D, Harrison G, Koch P, Loisel S, Vianini P, Wagner J (2016) Old-age provision: past, present and future. Eur Actuar J 6(2):287–306MathSciNetCrossRefzbMATHGoogle Scholar
  3. 3.
    Bauer D, Phillips R, Zanjani G (2013) Financial pricing of insurance, handbook of insurance. Springer, New York, pp 627–645CrossRefGoogle Scholar
  4. 4.
    Bauer D, Zanjani G (2016) The marginal cost of risk, risk measures, and capital allocation. Manag Sci 62(5):1431–1457CrossRefGoogle Scholar
  5. 5.
    Braun A, Fischer M, Schmeiser H (2017) Saving for retirement in a low interest rate environment: are life insurance products good investments?. University of St. Gallen, St. Gallen (preprint) Google Scholar
  6. 6.
    Braun A, Schmeiser H, Schreiber F (2016) On consumer preferences and the willingness to pay for term life insurance. Eur J Oper Res 253(3):761–776CrossRefzbMATHGoogle Scholar
  7. 7.
    Bühlmann H (1970) Mathematical methods in risk theory. Springer, BerlinzbMATHGoogle Scholar
  8. 8.
    Brunnermeier MK, Eisenbach T, Sannikov Y (2013) Macroeconomics with financial frictions: a survey. Advances in economics and econometrics, tenth world congress of the econometric society. Cambridge University Press, New YorkGoogle Scholar
  9. 9.
    Cambou M, Filipovic D (2018) Replicating portfolio approach to capital calculation. Finance Stoch 22(1):181–203MathSciNetCrossRefzbMATHGoogle Scholar
  10. 10.
    Cambou M, Filipovic D (2017) Model uncertainty and scenario aggregation. Math Finance 27(2):534–567MathSciNetCrossRefGoogle Scholar
  11. 11.
    Dhaene J, Stassen B, Barigou K, Linders D, Chen Z (2017) Fair valuation of insurance liabilities: merging actuarial judgement and market-consistency. Insur Math Econ 76:14–27MathSciNetCrossRefzbMATHGoogle Scholar
  12. 12.
    Domanski D, Shin HS, Sushko V (2017) The hunt for duration: not waving but drowning? IMF Econ Rev 65(1):113–153CrossRefGoogle Scholar
  13. 13.
    Duffie D, Strulovici B (2012) Capital mobility and asset pricing. Econometrica 80(6):2469–2509MathSciNetCrossRefzbMATHGoogle Scholar
  14. 14.
    El Karoui N, Loisel S, Prigent JL, Vedani J (2017) Market inconsistencies of the market-consistent European life insurance economic valuations: pitfalls and practical solutions. Eur Actuar J 7(1):1–28MathSciNetCrossRefzbMATHGoogle Scholar
  15. 15.
    Embrechts P, Liu H, Wang R (2017) Quantile-based risk sharing. Oper Res (in press) Google Scholar
  16. 16.
    Embrechts P, Wang B, Wang R (2015) Aggregation-robustness and model uncertainty of regulatory risk measures. Finance Stochast 19(4):763–790MathSciNetCrossRefzbMATHGoogle Scholar
  17. 17.
    Engsner H, Lindholm M, Lindskog F (2017) Insurance valuation: a computable multi-period cost-of-capital approach. Insur Math Econ 72:250–264MathSciNetCrossRefzbMATHGoogle Scholar
  18. 18.
    Froot KA, Stein JC (1998) Risk management, capital budgeting, and capital structure policy for financial institutions: an integrated approach. J Finance Econ 47(1):55–82CrossRefGoogle Scholar
  19. 19.
    Gatzert N, Holzmüller I, Schmeiser H (2012) Creating customer value in participating life insurance. J Risk Insur 79(3):645–670CrossRefGoogle Scholar
  20. 20.
    Hansen LP, Sargent TJ (2008) Robustness. Princeton University Press, PrincetonCrossRefzbMATHGoogle Scholar
  21. 21.
    Jorgensen PL (2017) An Analysis of the Solvency II Regulatory Framework’s Smith-Wilson Model for the Term Structure of Risk-free Interest Rates. Aarhus University, Aarhus (preprint) Google Scholar
  22. 22.
    Knispel T, Stahl G, Weber S (2011) From the equivalence principle to market consistent valuation. Jahresbericht der Deutschen Mathematiker-Vereinigung 113:139–172MathSciNetCrossRefzbMATHGoogle Scholar
  23. 23.
    Koch-Medina P, Cambou M, Munari C (2014) Expert forum on “risk measures and regulation in insurance”, University of Zurich. http://media.swissre.com/documents/Summary_of_research_topics1.pdf. Accessed 29 Mar 2018
  24. 24.
    Korn R, Krekel M (2002) Optimal portfolios with fixed consumption or income streams, Berichte des Fraunhofer ITWM 31Google Scholar
  25. 25.
    Korn R (2005) Optimal portfolios with a positive lower bound on final wealth. Quant Finance 5(3):315–321MathSciNetCrossRefzbMATHGoogle Scholar
  26. 26.
    Kupper M, Cheridito P, Filipovic D (2008) Dynamic risk measures, valuations and optimal dividends for insurance: mathematics of solvency in mini-workshop. Mathematisches Forschungsinstitut Oberwolfach, OberwolfachGoogle Scholar
  27. 27.
    McNeil AJ, Smith AD (2012) Multivariate stress scenarios and solvency. Insur Math Econ 50(3):299–308MathSciNetCrossRefzbMATHGoogle Scholar
  28. 28.
    Möhr C (2011) Market-consistent valuation of insurance liabilities by cost of capital. ASTIN Bull 41(2):315–341MathSciNetzbMATHGoogle Scholar
  29. 29.
    Natolski J, Werner R (2014) Mathematical analysis of different approaches for replicating portfolios. Eur Actuar J 4(2):411–435MathSciNetCrossRefzbMATHGoogle Scholar
  30. 30.
    Pelsser A (2003) Pricing and hedging guaranteed annuity options via static option replication. Insur Math Econ 33(2):283–296MathSciNetCrossRefzbMATHGoogle Scholar
  31. 31.
    Pelsser A, Schweizer J (2015) The difference between LSMC and replicating portfolio in insurance liability modelling ricing and hedging guaranteed annuity options via static option replication. Eur Actuar J 6(2):441–494CrossRefGoogle Scholar
  32. 32.
    Pelsser A, Stadje M (2014) Time-consistent and market-consistent evaluations. Math Finance 24(1):25–65MathSciNetCrossRefzbMATHGoogle Scholar
  33. 33.
    Persaud A (2015) How not to regulate insurance markets: the risks and dangers of Solvency II. Peterson Institute of International Economics, Policy Brief 15–5Google Scholar
  34. 34.
    Phillips RD, Cummins JD, Allen F (1998) Financial pricing of insurance in the multiple-line insurance company. J Risk Insur 65(4):597–636CrossRefGoogle Scholar
  35. 35.
    Ruß J, Schelling S (2017) Multi cumulative prospect theory and the demand for cliquet-style guarantees. J Risk Insur.  https://doi.org/10.1111/jori.12195
  36. 36.
    Schmeiser H, Wagner J (2015) A proposal on how the regulator should set minimum interest rate guarantees in participating life insurance contracts. J Risk Insur 82(3):659–686CrossRefGoogle Scholar
  37. 37.
    Schmeiser H, Wagner J (2016) What transaction costs are acceptable in life insurance products from the policyholders’ viewpoint? J Risk Finance 17(3):277–294CrossRefGoogle Scholar
  38. 38.
    Tsanakas A, Wüthrich MV, Cerny A (2013) Market value margin via mean-variance hedging. ASTIN Bull 43:301–322MathSciNetCrossRefzbMATHGoogle Scholar
  39. 39.
    Wüthrich MV (2011) An academic view on the illiquidity premium and market-consistent valuation in insurance. Eur Actuar J 1(1):93–105MathSciNetCrossRefzbMATHGoogle Scholar

Copyright information

© EAJ Association 2018

Authors and Affiliations

  1. 1.Department of Actuarial Science, Faculty of Business and EconomicsUniversity of Lausanne and Swiss Finance InstituteLausanneSwitzerland
  2. 2.Culverhouse College of CommerceThe University of AlabamaTuscaloosaUS
  3. 3.RiskLab and Swiss Finance InstituteETH ZurichZurichSwitzerland
  4. 4.EPFL and Swiss Finance InstituteLausanneSwitzerland
  5. 5.Center for Finance and InsuranceUniversity of ZurichZurichSwitzerland
  6. 6.Fachbereich MathematikTechnische Universität Kaiserslautern, and Fraunhofer ITWMKaiserslauternGermany
  7. 7.Institut de Science Financiére et d’Assurances (ISFA), Laboratoire SAFUniversité Claude Bernard LyonLyonFrance
  8. 8.Maastricht UniversityNetsparThe Netherlands
  9. 9.Munich ReMunichGermany
  10. 10.Institute of Insurance EconomicsUniversity of St. GallenSt. GallenSwitzerland

Personalised recommendations

Cite article

Buy options