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withdraw assumption + negative reserve

U

uktous

Member
hi,
Reserve can be negative at early duration.

When we set withdraw assumption in pricing and reserving basis, what special allowance / treatment should be made?
 
If you hold a negative reserve, then that means you have capitalised some future profits. However, if the policyholder withdraws in early durations then the negative reserve would have capitalised profits prematurely...

I think the solvency capital would allow for this risk.
 
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