Hi all, i was wondering the following with regards to risks associated with a contract. in question q 1.12 it describes a general claim and makes 2 comparisons. a) claim cost vs reserve b) claim cost vs asset share. in the question is mentions that for mortality risk we look at the death strain so (a) and for withdrawal risk (b) so claim vs asset share. is that correct ? however the solution assumes "a claim cost" is does not differentiate that each of the two cases a and b are applicable in two different risks. am i losing sth? on the other hand in q2.2 for mortality risk the solution mentions. - reserve may have been built so the mortality risk is low and - death strain discussion as above. So to understand it for : 1. mortality risk : we talk about reserves (built or not) and death strain and for 2. withdrawal risk : asset share -ve and asset share vs withdrawal benefit? if this is the case why not compare the asset share with the death benefit to see the accumulated loss/profit as it mentions in q1.12? thanks
Hi You're correct that the solution (with its distinction between (a) capital release/strain at point of claim and (b) overall profit/loss on a claim) applies to both cases. The question isn't trying to establish a 100% rule to always use when looking at mortality and withdrawal risk. It's just making the point that in what's been said earlier in this particular chapter, the first interpretation was used for mortality risk and the second for withdrawal risk. Hope this clarifies Lynn
