Chapter 23 mentions that one of the key parts of managing market risk is management's understanding of the sensitivity of the liability calculations to movements in market values. Given that the BEL is discounted using published risk-free rates (and no longer using actual expected investment returns on backing assets), how do movements in market values impact the liabilities?
Don't forget that the amounts of the liabilities might be dependent on market conditions, eg if we have guaranteed amounts or liabilities that depend on a market index. Also, even if we are talking about Solvency II BEL that are discounted at the risk-free rate, then that risk-free rate has itself been derived from the market values (of swaps or government bonds, depending on the currency). Hope this helps Lynn
