This paper proposes a technique to derive the optimal surrender strategy for a variable annuity (VA) as a function of the underlying fund value. This approach is based on splitting the value of the VA into a European part and an early exercise premium following the work of Kim and Yu (1996) and...

This paper analyzes the performance of the Bulgarian private defined contribution pensions in the second and third pillars of the pension system.

Slow economic growth and continuing low interest rate environment is putting pressure on the insurance sector. Delays in the implementation of Solvency II could create vulnerabilities in the insurance sector. The approval of internal models is important for determining adequacy of capital levels...

The paper discusses the limits to market-based risk transfer in the financial system and the implications for the management of systemic long-term financial risks. Financial instruments or markets to transfer and better manage these risks across institutions and sectors are, as yet, either...

Stress testing is a useful and increasingly popular, yet sometimes misunderstood, method of analyzing the resilience of financial systems to adverse events. This paper aims to help demystify stress tests and illustrate their strengths and weaknesses. Using an Excel-based template with...

A full assessment of Israel’s compliance with the Insurance Core Principles (ICPs) of the International Association of Insurance Supervisors (IAIS) is presented. The Minister of Finance bears the political responsibility for supervisory oversight of the Israeli insurance system. Nonlife...

We investigate the total time of deducting fees for variable annuities with state-dependent fee. This fee charging method is studied recently by Bernard et al. (2014) and Delong (2014) in which the fees deducted from the policyholder’s account depend on the account value. However, both of them...

We study the valuation of variable annuities for an insurer. We concentrate on two types of these contracts that are the guaranteed minimum death benefits and the guaranteed minimum living benefits ones and that allow the insured to withdraw money from the associated account. As for many...