Question

Which approaches can be used to account for the risk of adverse future experience in cashflow modeling for life insurance contracts?

a.

Using historical data only

b.

Utilizing margins in the expected values, employing a stochastic approach, and incorporating the risk element of the risk discount rate

c.

Ignoring the risk entirely

d.

Using fixed assumptions without adjustment

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (b).Utilizing margins in the expected values, employing a stochastic approach, and incorporating the risk element of the risk discount rate Explanation:In cashflow modeling for life insurance contracts, the risk of adverse future experience can be addressed through various approaches, including utilizing margins in the expected values, employing a stochastic approach, and incorporating the risk element of the risk discount rate.

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Q. Which approaches can be used to account for the risk of adverse future experience in cashflow modeling for life insurance contracts?
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