Q. What are the two key factors that contribute to sensitivity to the investment assumption?

View solution

Q. How does the size of reserves affect sensitivity to changes in investment return?

View solution

Q. What is reinvestment risk?

View solution

Q. How does the expectation of future positive cash flow impact the investment assumption?

View solution

Q. In what scenario would future reinvestment yields still be important even if the predicted cash flow is negative?

View solution

Q. How does the degree of matching affect the influence of future investment rates on the investment return assumption?

View solution

Q. Why is the expected time between changes to the company’s pricing basis for a contract important in establishing the investment assumption?

View solution

Q. What is an important consideration when determining the likely future return of the investment mix for the contract?

View solution

Q. Why is the intended investment mix for a contract affected by the level of free assets or capital available to the company?

View solution

Q. What is the purpose of using interest rate models and equity pricing models in estimating likely future returns?

View solution

Q. How do complex stochastic models contribute to the estimation of likely future returns?

View solution

Q. What is interest rate risk in the context of insurance firms?

View solution

Q. How does falling interest rates impact the reinvestment risk for insurance companies?

View solution

Q. In response to low interest rates, what strategy do insurance companies often employ to attract buyers?

View solution

Q. How do insurance companies mitigate the risk of interest rate fluctuations affecting their investments and liabilities?

View solution

Q. What is disintermediation risk in the context of insurance?

View solution

Q. How can a prolonged low interest rate environment impact insurance companies?

View solution

Q. What measures do insurers take to mitigate interest rate risk?

View solution

Q. How does rising interest rates affect insurers whose duration of assets exceeds that of their liabilities?

View solution

Q. What is the consequence of higher leverage for insurance companies?

View solution