| Summary: | 碩士 === 東吳大學 === 財務工程與精算數學系 === 97 === Due to the advanced medical technology, the mortality is improving. The
improvement of mortality will affect policy pricing and accrual reserves, and
increase policy duration. These changes lead to life insurance company bearing
more interest rate and mortality.
To measure the effect of improving mortality, following Solvency II
regulatory formula, we take the whole life insurance policy and the whole life
annuity policy as illustrative examples. Based on the percentile and cost of capital
two approaches, we calculate Best Estimate, Risk Margin and Solvency Capital
Requirement under various mortality set-ups. By comparing the Risk Margin
estimations, the concluded results are as follows:
1. If a life insurance company following the current practice without considering
the improving mortality, the whole life insurance policy will be overpriced and
hence accrue too much reserve; while a whole life annuity policy will be
underpriced. For both policies, Taiwan males have greater mortality sensitivity
than Taiwan females.
2. By taking into account the improvement of mortality rate in policy pricing,
Both whole life insurance and whole life annuity policies need collect more
Technical Provision and Solvency Capital Requirement. For both Taiwan male
and Taiwan female, a whole life insurance has greater sensitivity than a whole life
annuity policy.
3. For both policies, greater Risk Margin is estimated by using Cost of Capital
approach.
4. In calculating Risk Margin, a 6% cost of capital suggested by Quantitative
Impact Studies﹙QIS﹚is used in this paper. The results will be more close to those
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estimated from the percentile approach if we choose a 4% cost of capital which is
suggested by Comitè Europèen des Assurances﹙CEA﹚.
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