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An exploration of the immunization approach to provision for unit-linked policies with guarantees

Published online by Cambridge University Press:  20 April 2012

T. P. Collins
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Extract

1.1. This paper explores the possibility that a company which sells unit-linked policies with death and maturity benefit guarantees may follow an investment strategy which reduces the risks associated with them. It originated when the author was requested by the Institute to study papers on the subject by P. P. Boyle, M. J. Brennan and E. S. Schwartz of the University of British Columbia in Canada and also a paper presented to the Society of Actuaries in Ireland by J. C. Fagan.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 109 , Issue 2 , September 1982 , pp. 241 - 284
Copyright
Copyright © Institute and Faculty of Actuaries 1982

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References

(1) Boyle, P. P. & Schwartz, E. S. Equilibrium Prices of Death Benefit Guarantees and Maturity Guarantees under Equity-Linked Contracts and Optimal Investment Strategies for the Sellers of Such Contracts, Working Paper No. 338, Faculty of Commerce and Business Administration, University of British Columbia, Vancouver. A copy is available in the Institute library.Google Scholar
(2) Brennan, M. J. & Schwartz, E. S. (1979) Pricing and Investment Strategies for Guaranteed Equity-Linked Life Insurance, S. S. Huebner Foundation for Insurance Education, University of Pennsylvania.Google Scholar
(3) Fagan, J. C. (1977) Maturity Guarantees under Investment-Linked Contracts, presented to the Society of Actuaries in Ireland (10 November). A copy is available in the Institute library.Google Scholar
(4) Benjamin, S. (1971) A Study of Maturity Guarantees under Equity-Linked Policies. Trans. 20th Int. Congr. Act. II, 17.Google Scholar
(5) Maturity Guarantees Working Party. Report. J.I.A. 107, 103.Google Scholar
(6) Black, F. & Scholes, M. The Pricing of Options and Corporate Liabilities. J. Pol. Econ. 81, 637.CrossRefGoogle Scholar
(7) Merton, R. C. The Theory of Rational Option Pricing. Bell. J. Econ. Man. Sci. 4, 141.CrossRefGoogle Scholar
(8) Redington, F. M. Review of the Principles of Life-Office Valuations. J.I.A. 105, 177.Google Scholar
(9) Collins, T. P. Immunization Theory for Unit-Linked Policies with Guarantees, OARD Paper No. 28, available in the Institute library (a version has also been submitted as a Ph.D. thesis to Trinity College, Dublin).Google Scholar
(10) Cootner, P. H. (ed.) (1964) The Random Character of Stock Market Prices. M.I.T. Press.Google Scholar