Hi
In this chapter under the Unit linked section there is no mention of persistency risk as a key risk to insurers - given early withdrawals do present a risk, why is this not mentioned as a key risk for UL products?
Is there any information on how investment linked basis charges compare to unit linked basis charges - would it be correct to say that IL contract charges have the potential to be less transparent due to the complex nature of the product when it involves capital guarantees as well as investment upside?
It also mentions a risk particular to IL policies. May not be able to match the guarantee liability precisely. Due to:
- time lag --> does this relate to time lag between changes to index and corresponding changes to the assets invested in (if fully replicating the index), or is this something else?
- unable to create a portfolio that replicates the index e.g. no derivative available, and instead have to partially replicate or fully replicate (but with time lag effects).
Thank you
Last edited: Feb 25, 2024