Company: Numerix LLC
Category: Market Risk
Published: 26 May 2016
Insurance guarantees are exotic in nature because they have to take into consideration not only actuarial parameters (e.g. morality) but have to address financial guarantees and be tailored to more details.
Given that exotic derivatives can be, in general, very sensitive to all kinds of modelling assumptions we immediately see that their appropriate modelling is key for a company dealing with more narrow profit margins and lower returns on investments.
This white paper assesses the risk associated with a GLWB rider for FIAs and analyses how different modelling choices can affect these risks. In Particular, the impacts of improving the estimate of future caps will be explored.