On the Financial Risk Factor in Fair Valuation of the Mathematical Provision

Abstract

The paper focuses on the financial variable for the provision evaluation and analyses the sensitivity of the fair valuation to interest rate parameters. In a determinist scenario the evaluation risk is studied in a market value perspective and its impact is measured through the sensitivity of the net value of the intermediation portfolio to a modification of the financial risk driver. In a stochastic scenario the sensitivity of the current values of projected liability cash-flow is investigated by means of a numerical implementation.

Keywords: Life insurance, financial risk, insolvency risk, mathematical provisions

JEL Classification: G22, G28, G13