With actuarial cash flow models, we try to predict the future. The results of cash flow models are put on a timeline with future dates. In this post, we will discuss time in actuarial cash flow models.
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Let's start with the beginning. Timeline starts at zero (\( t=0 \)) which reflects the valuation period. If the reporting period is the end …
The two main valuation approaches in life insurance for IFRS 17 are General Measurement Model (GMM) Variable Fee Approach (VFA).
In this post, let's that a look at what the Variable Fee Approach is and when it should be used.
The VFA is a modification to the General Measurement Model (GMM) for direct participating contracts. These contracts need to fulfil certain conditions at inception.
Only direct participating contracts fall under the scope of the VFA under IFRS 17.
Direct participating contracts have a substantial portion of investment-related services. The policyholder is promised an investment return based …
In this post, we will go over an overview of actuarial cash flow model. If you are interested in building models in Python, you can use the cashflower package.
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Run plan - run plan is a list of runs that we want to perform with the model. Actuaries need results for the model under various assumptions. For example, the first run has base assumptions, the second shocked mortality and the third shocked lapses. Each of these …
Insurance companies rely on two main approaches for cash flow modelling: deterministic and stochastic. These models help estimate future liabilities of insurance products, guiding actuaries in predicting the future using historical data and expert judgment.
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Imagine predicting the future: one way is to follow the most likely path, while the other is like exploring various possible paths, akin to the multiverse concept in Spiderman, where multiple worlds have slightly different versions of Peter Parker.
In the deterministic approach, we calculate the …
A positive CSM is released to the income statement over the coverage period.
What about groups of insurance contracts that are onerous, and therefore expected to be loss-making?
In this post, we will consider three cases:
The group of contracts might have a positive CSM at inception. It means that the insurer expected to make a profit on them.
On the way, there might have been changes in non-financial assumptions. Let's assume that changes in non-financial assumptions have negative impact on the CSM, but …