Life insurers sell savings contracts with surrender options, which allow policyholders to prematurely receive … guaranteed surrender values. These surrender options move toward the money when interest rates rise. Hence, higher interest rates … raise surrender rates, as we document empirically by exploiting plausibly exogenous variation in monetary policy. Using a …

policy conditions. However, reserve-dependent surrender values and reserve-dependent expenses are common in insurance … in reserve calculations provided the surrender payment equals the accumulated reserve. In this paper, more complex …