M_F102_Life Products 3 Flashcards
CTA Capital
Capital requirements generally higher than basic term assurance.
IA Risks
Longevity risk (including mortality improvements); anti-selection risk; investment and expense risk (due to long term nature); withdrawal risk if allowed.
IA Capital
Capital may be significant depends on difference in pricing and valuation bases and extent of the solvency margins required.
Convertible TA risk
Risk of selection at exercise date (priced over term of original contract).
Group annuities may be offered by the retirement fund for it’s members.
- A deferred annuity group product is also possible.
Deferred Annuity - risks to the insurer
-Risks similar to endowment and immediate annuity.
May be additional risk if there is a guarantee at the vesting date. Similarly for capital requirements.
Deferred Annuity
- Pays out a regular benefit provided insured is alive at the end of the deferred (vesting) period.
Whole Life Assurances risks
- Mortality risk (especially early on); lapse risk (may also be selective); investment risk (as significant reserves build up); expense risk (due to long term nature).
Broad equity approach in unit pricing
the pricing basis (offer or bid basis) is only changed if there is a significant cashflow movement against the existing basis - i.e. currently using offer basis but the recent transaction requires the cancellation of units hence a bid basis required.
This avoids frequent price changes.
Deferred Annuity
-Single premium or regular premiums may be paid during vesting period.
Deferred Annuity
-Risks similar to endowment and immediate annuity. May be additional risk if there is a guarantee at the vesting date. Similarly for capital requirements.
Deferred Annuity
-Similar to combining an endowment with an immediate annuity.
Deferred Annuity
-Surrender value may be possible during vesting period, may depend on legislation.
