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mortality risk

U

uktous

Member
hi,
according to question 2.2 in actednote, there is mortality risk when the death benefit is greater than the asset share and when there are more death claim than expected.

Are there any mortality risk (or loss due to mortality) in the following 3 cases?

case1
death benefit is greater than the asset share and there are fewer death claim than expected

case2
death benefit is smaller than the asset share and there are more death claim than expected

case3
death benefit is smaller than the asset share and there are fewer death claim than expected
 
hi,
according to question 2.2 in actednote, there is mortality risk when the death benefit is greater than the asset share and when there are more death claim than expected.
Click to expand...

I'm sorry, this is a mistake in the notes. The asset share is the accumulated value of the past cashflows in respect of this cohort of business. Any claim in excess of asset share leads to a loss.

Asset share is calculated using the actual experience. We do not use expected experience, so there is nothing to compare against.

(Note that asset share is just one way of measuring profit. We could measure the profits emerging against statutory reserves. In this case we do make a loss whenever the death benefit is greater than the reserves and there are more death claims than expected.)

Are there any mortality risk (or loss due to mortality) in the following 3 cases?

case1
death benefit is greater than the asset share and there are fewer death claim than expected
Click to expand...

Every death leads to a loss.

The overall profitability of the contract will depend on the payouts throughout the life of the contract. The contract may be profitable if we payout less than asset share on surrender, maturity (not applicable to this question as its about whole life), or death later on in the contract.

case2
death benefit is smaller than the asset share and there are more death claim than expected
Click to expand...

This makes the contract more profitable as each death contributes a profit.

case3
death benefit is smaller than the asset share and there are fewer death claim than expected
Click to expand...

Each death contributes a profit. However, there must be more deaths or surrenders at other times, and these may or may not be profitable.

I'm sorry for the confusion caused by our answer in the notes.

Best wishes

Mark
 
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