This article introduces an equity-Libor Market Model (LMM) that integrates the investment strategy into the valuation process of participating life insurances. Within this framework, we consider bond portfolios rebalanced across multiple maturities and provide a semi-analytical formula for approximating the fair value of liabilities. We then investigate the impact of the investment policy on the net asset value and the solvency capital requirement. To carry out this analysis, we propose a Monte Carlo method for generating sample paths under both Libor and real measures, alongside an estimation procedure under the real measure. The nu- merical illustration focuses on the asset-liability management of an endowment and a life annuity.
Keywords: Libor market model, life insurance, asset-liability management
Sector: Insurance
Expertise: Assurance Vie
Authors: Donatien Hainaut and
Laurent Devineau
Publisher: Detralytics
Date: July 2024
Language: English
Pages: 29
Reference : Detra Note 2024-4
Donatien Hainaut est Conseiller Scientifique chez Detralytics et Professeur à l’UCLouvain (Belgique), où il dirige le Master en Data Science à orientation statistique. Auparavant, il a occupé plusieurs postes académiques, notamment en tant que Professeur Associé à la Rennes School of Business et à l’ENSAE à Paris. Il possède également une solide expérience en entreprise, ayant travaillé comme Risk Officer, Quantitative Analyst et ALM Officer.
Actuaire qualifié et titulaire d’un doctorat en Asset and Liability Management, ses recherches actuelles portent sur les mécanismes de contagion dans les processus stochastiques ainsi que sur les applications des réseaux de neurones en assurance.
Laurent joined Detralytics as Innovation Lead to promote innovation at the heart of the firm’s practices and strategy. A few months later, Laurent was appointed CEO of Detralytics France.
He began his career as a teacher before joining Suravenir, where he worked on issues relating to the valuation of loan portfolios and the construction of experience laws.
Laurent then spent nearly fifteen years managing the Research & Development and Innovation activities of Milliman and Addactis. Laurent was also Head of Risk Measurement at Allianz France, where he was responsible for calculating the entity’s Solvency 2 economic capital.
