Nonlinear reserving and multiple contract modifications in life insurance

DOI10.1016/J.INSMATHECO.2020.05.004MaRDI QIDQ784434zbMATH OpenOpenAlexFDO

Authors Marcus C. Christiansen, Boualem Djehiche

Publication date 3 August 2020

Published in Insurance Mathematics \& Economics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1911.06159

zbMATH Keywords

backward SDEsimplicit optionsnonlinear semi-Markov chainprospective reserveThiele equation

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Contract theory (moral hazard, adverse selection) (91B41) Actuarial mathematics (91G05)

Abstract: Life insurance cash flows become reserve dependent when contract conditions are modified during the contract term on condition that actuarial equivalence is maintained. As a result, insurance cash flows and prospective reserves depend on each other in a circular way, and it is a non-trivial problem to solve that circularity and make cash flows and prospective reserves well-defined. In Markovian models, the (stochastic) Thiele equation and the Cantelli Theorem are the standard tools for solving the circularity issue and for maintaining actuarial equivalence. This paper expands the stochastic Thiele equation and the Cantelli Theorem to non-Markovian frameworks and presents a recursive scheme for the calculation of multiple contract modifications.

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Cited in

(9)

• Time-dynamic evaluations under non-monotone information generated by marked point processes
• Scaled insurance cash flows: representation and computation via change of measure techniques
• Reserve-dependent benefits and costs in life and health insurance contracts
• Dynamics of state-wise prospective reserves in the presence of non-monotone information
• Extension of as-if-Markov modeling to scaled payments
• Nonlinear reserving in life insurance: aggregation and mean-field approximation
• COMPUTATION OF BONUS IN MULTI-STATE LIFE INSURANCE
• Transaction time models in multi-state life insurance
• As-if-Markov reserves for reserve-dependent payments

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