Good day Say we want to test sensitivity of premiums and reserves to parameters, take mortality as an example. For premiums, we apply differing percentage changes to mortality and then measure its percentage change in premium. But what about reserves? Reserves rely on the calculated premium. Say we apply a 2% improvement to mortality. This improvement is then applied to the reserve basis (which is more prudent than the pricing basis). Should we also then apply the 2% improvement to the premium basis as well? Or should premiums remain fixed (no change to the premium basis) in testing sensitivity of the reserves? Thanks in advance.
Hi If you are sensitivity testing the current reserves due to change in the reserving basis, then the contracts have already been sold and the premiums are fixed. Best wishes Mark
