Abstract
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: Life Insurance
Authors: Donatien Hainaut and
Laurent Devineau
Publisher: Detralytics
Date: July 2024
Language: English
Pages: 29
Reference : Detra Note 2024-4
About the authors
Donatien Hainaut
Donatien Hainaut is a Scientific Advisor at Detralytics and a professor at UCLouvain (Belgium), where he serves as the Director of the Master’s program in Data Science with a statistical orientation. Prior to this, he held several academic positions, including Associate Professor at Rennes School of Business and ENSAE in Paris. He also has extensive industry experience, having worked as a Risk Officer, Quantitative Analyst, and ALM Officer.
Donatien is a Qualified Actuary and holds a PhD in the field of Asset and Liability Management. His current research focuses on contagion mechanisms in stochastic processes and the applications of neural networks in insurance.
Laurent Devineau
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.
