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Valuation interest rates

D

dChetty

Member
When actuaries talk about valuation rate in pricing, do they refer to the growth rate in (premiums-expenses) and valuation rate for assets and liabilities refer to the discount rate?
 
I don't fully follow the question - depends on the context - do need to be careful on how to interpret phrases like this.
 
Just to clarify my question...
Does valuation rates for assets and liabilities refer to discount rates?
Does valuation rate for pricing refer to investment return on net cash flows i.e. (Prems-Expenses)*(1+i), where i is the valuation rate?
 
You don't tend to use "valuation rate" in pricing.
In pricing you have an investment return assumption (might be called an interest rate), which represents the expected return on assets. This is the i in the (1+i)*(P-E) you are referring to. You might also have a RDR to work out the present value of future expected profits.
The valuation rate of interest usually refers to the investment return assumption used to calculate the reserves/liabilities. If you're using a simple formula method like the GPV then you are using it to discount back the future benefits, expenses and premiums.
 
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