I
Iori_
Member
Hi, I'm referring to Sep 2007 Question 2 (i) which relates to analysis of change in EV - "Explain which assumptions could give rise to experience variations and which of these are likely to be most significant".
Some of the assumptions that could possibly give rise to experience variations are the following:
- Mortality
- Withdrawals
- Investment
- Expenses
I understand that variations in mortality and withdrawals during, for example, the past year will impact NAV but also the VIF as there will be less (or more) actual number of policies in-force at the end of the year than expected.
However, for expense variation I'm not sure why the VIF would be impacted per the solution (ASET). I understand that NAV will be impacted as variation in actual and expected expense experience will emerge as surplus/deficit. However, why would VIF change? I would understand if we were dealing with change in expense assumption here, but we are only dealing with expense experience variation. If the actual level of expenses does not change the number of in-force policies at year-end then how can it have an impact on the VIF holding both EV and reserving assumptions constant?
Some of the assumptions that could possibly give rise to experience variations are the following:
- Mortality
- Withdrawals
- Investment
- Expenses
I understand that variations in mortality and withdrawals during, for example, the past year will impact NAV but also the VIF as there will be less (or more) actual number of policies in-force at the end of the year than expected.
However, for expense variation I'm not sure why the VIF would be impacted per the solution (ASET). I understand that NAV will be impacted as variation in actual and expected expense experience will emerge as surplus/deficit. However, why would VIF change? I would understand if we were dealing with change in expense assumption here, but we are only dealing with expense experience variation. If the actual level of expenses does not change the number of in-force policies at year-end then how can it have an impact on the VIF holding both EV and reserving assumptions constant?