Cost of Guarantees (27)

Question 1

Mortality options factors

Answer 1

– policy term
– # exercise dates
– conditions attaching
– encouragement to exercise
– extra costs
– selective withdrawals

Question 2

Assumptions for valuing mortality options

Answer 2

– probability of exercise
– additional benefit level
– expected mortality of lives exercising the option
– additional expenses

Question 3

Option take-up rates

Answer 3

1. conventional / simplistic
2. North American / realistic

Question 4

Value investment guarantees

Answer 4

1. stochastic simulations
2. option pricing techniques