Life and pension providers are subject to increasing regulations and face much higher capital and risk management requirements based on the European Solvency II directive as well as methodology and disclosure requirements from IFRS 17.
Motivated by Solvency II requirements, requiring the incorporation of policyholder behavior and portfolio performance into the liability modeling of a life insurance company, the Keylane actuary team proposes some new techniques to efficiently compute future values of the first-order reserve and the third-order cash flow under varying economic scenarios.
These new techniques are discussed and described in the paper Cash flow techniques for asset-liability management issued in the Scandinavian Actuarial Journal, no. 3/2020 published by Taylor & Francis. The paper deals with the following topics:
- General technical setup
- The information-less prospective reserve
- Modeling first- and third-order behavior
- The expected first-order reserve
- Bending cash flows
The authors of the paper are all current and former members of the Keylane Valuation/ALM team and the results of this paper were obtained while developing the Keylane ALM solution to meet the life and pension providers’ obligations according to European Solvency II and IFRS 17 requirements.
A big thank you goes to the authors Kim Aguirre Nolsøe, Dieter Degrijse, Sofie Ahm, Kristoffer Brix, Mads Storgaard and Jesper Strodl.
For more information about the paper or Keylane’s risk management solutions for life and pension, please contact Actuary Kim Aguirre Nolsøe at firstname.lastname@example.org or Actuary Dieter Degrijse at email@example.com