Traditional life insurance policies in many markets are sold with minimum interest rate guarantees. This paper concentrates on the risk cliquet-style guarantees impose on the insurer, measured by shortfall probabilities under the so-called “real-world probability measure P”. We develop a...

Traditional participating life insurance contracts with year-to-year (cliquet-style) guarantees have come under pressure in the current situation of low interest rates and volatile capital markets, in particular when priced in a market-consistent valuation framework. In addition, such guarantees...