Hi, the ASET solution breaks down the calculation of BEL into three components with a note that the BEL for GAO "may be" calculated separately.
Would it still be correct to break down the calculation of BEL into two components for UL product?
1. BEL unit reserve
2. BEL non unit reserve including the GAO reserve which is a guaranteed non-unit benefit?
If yes, then the BEL non unit would be calculated stochastically and the cashflows would include the PV benefits (GAO) + PV expenses - PV premiums (non unit allocated) - PV fixed charges.
Calculation of PV of guaranteed annuity:
1. Could this calculation be carried out by using simulated RFR from ESG and annuity factor modelled in the projection model?
2. The ASET solution describes - for example - "the market annuity rate should be taken from an observed open market annuity simulated using RFR" - how can this be modelled in a stochastic model? I am trying to envision the practicalities.
Last edited by a moderator: Aug 4, 2017