Hi, Could you please help me with the below queries ( in reference to page10-11 on chapter 15 (ALM)) Que 1: Could you please let me know if my below understanding is correct ( assuming solvency II regime , stochastic model is used) The model office projections are used for ALM purpose. The asset projections are modelled separately from the liabilities projection model. Calibration in asset model is done on real world basis and calibrations in liability model is done on risk neutral basis. while doing the projections, allowance should be made (where relevant) for future bonuses (if with profit contract), palatable management actions, policyholders behavior. Que 2: In with profit contracts, BEL is also dependent on future bonus. These bonuses are further dependent on (to some extent) on future investment return. Since asset (Calibration done on real world basis) and Liabilities (Calibration done on risk neutral basis) are modelled separately, how could the "future investment return" generated in asset model will interact with the Liability model? Thank you in advance.
Hi You might find the following thread helpful: https://www.acted.co.uk/forums/index.php?threads/asset-liability-modelling.15725/#post-59790 Thanks Em