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Stochastic Methods for Insurance

Stochastic Methods for Insurance

Jacques Janssen, Raimondo Manca

ISBN: 978-1-848-21899-4

Feb 2019, Wiley-ISTE

200 pages

Select type: Hardcover

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Life Insurance is by essence a field where stochastic processes can be easily applied. Indeed, a Life Insurance contract can be characterized by two fundamental elements: time and risk: this constitutes precisely the core business of stochastic processes!  Life Insurance is also at the conjunction between Insurance and Finance. Life products contain often a crucial saving aspect but simultaneously they are generally based on various insurance risks (mortality, longevity, disability, long term care). Random techniques inspired by modern quantitative finance as well as by actuarial theory are therefore largely used.

The purpose of this book is to show how stochastic processes develop, and can lead to various stochastic methods applied to life insurance, in order to price, valuate, hedge and manage these contracts.  This random perspective becomes particularly essential nowadays in the context of SOLVENCY II which requires sound risk management modelling.  In this context, in contrast with the traditional way in actuarial science to model life insurance (constant discount rate mixed with a fixed deterministic life table), modern approaches incorporate the stochastic nature of these elements.

Chapter 1 : Classical principles of life contingencies       

Chapter 2 : Market consistent valuation and Solvency II of life insurance contracts

Chapter 3 : Pricing and reserving of life insurance contracts with participation

Chapter 4 : Surrender risk and American options

Chapter 5 : Solvency constraints and Barrier options

Chapter 6 : Pricing of maturity guarantee for unit-linked contracts

Chapter 7 : Look back options and exchange options applied to unit –linked products

Chapter 8 : Valuation of life insurance under stochastic mortality rates

Chapter 9 : Guaranteed annuity option

Chapter10:  Standards migration life insurance models   

Chapter 11 Standard Markov and Semi –Markov life insurance models

Chapter 12:  Multiple life insurance migration models   

Chapter 13: Disability insurance  models     

Chapter 14:  Claim amount, reserves and solvency models