Market Value of Insurance Contracts with Profit Sharing

The valuation of insurance contracts using a market value approach, also known as the fair value approach has recently attracted a lot of interest. Seconding this trend, we would like to illustrate in this paper how we can determine the market value of a with-profits insurance policy. The method we use is based on finding a set of financial instruments that can identically replicate the cash flows of the insurance policy. Using this approach we show that the market value of a with-profits insurance policy can be determined objectively