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Notes on bonus and solvency vauations

Published online by Cambridge University Press:  18 August 2016

Karl-Gustav Hagstroem
Karl-Gustav Hagstroem
Affiliation:
Livfoersaekringsbolaget Framtiden, Stockholm
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Extract

My intention is to give some simple illustrations of the difficulties which arise when the market rate of interest has sunk below the limit of solvency for parts of a company's stock of life contracts. In fact, the “partial liquidation” which at such a contingency would appear most natural to the unbiased mind of an actuary, does not seem to be seriously contemplated in insurance legislation. As regards Sweden, this mathematically correct reduction of the liabilities of some of the contracts could perhaps be realized within the legal frame in Mutual Offices. But it is impossible for other companies. It seems therefore necessary to attack the problem from the purely actuarial point of view. If we can find a technically satisfactory solution, it might then be possible to go farther with the question of giving the procedure legal shape.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 70 , Issue 2 , July 1939 , pp. 119 - 150
Copyright
Copyright © Institute and Faculty of Actuaries 1939

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References

page 120 note * See p. 121.

page 122 note * i.e. the pure liabilities according to the contract without any bonus additions.

page 130 note * i.e. the year when interest is assumed to revert to 4% p.a.

page 134 note * Hagstroem-Palmqvist: Les fluctuations de l'intérêt. XIe Congrès International d'Actuaires, Paris, 1937, Vol. 1, p. 189.

page 135 note * Lag den 25 Maj 1917 om försäkringsrörelses, ss. 139 and 140. The quotation is a translation from the Act.

page 138 note * Wet op het Levensverzekeringbedrijf (Stbl 1922, no. 716). See especially ss.40 and 49.

page 138 note † Gesetz über die Beaufsichtigung der privaten Versicherungsunternehmungen und Bausparkassen 6 June 1931.See ss.81 and 89.

page 138 note ‡ Assurance Companies Act, 1909, s,. 18.

page 138 note § I have borrowed this term from actual British practice but given it another meaning.

page 139 note † The functions and used in the formulae for the simple bonus cases are defined as follows:

The formulae thus make allowance for an expense loading of 2.8% of the bonuses as well as of the sum assured.