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| Main Authors: | , , |
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| Format: | Preprint |
| Published: |
2025
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/2509.00011 |
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| _version_ | 1866912559566684160 |
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| author | Haçarız, Oytun Kleinow, Torsten Macdonald, Angus S. |
| author_facet | Haçarız, Oytun Kleinow, Torsten Macdonald, Angus S. |
| contents | We review Markov models of surplus in life insurance based on a counting process following Norberg (1991), uniting probabilistic theory with elements of practice largely drawn from UK experience. First, we organize models systematically based on one and two technical bases, including a suitable descriptive notation. Extending this to three technical bases to accommodate different valuation approaches leads us: (a) to expand the definition of 'technical basis' to include non-contractual cashflows recognized in the associated Thiele equation; and (b) to add new (mainly) systematic terms to the surplus. Making these cashflows dynamic or 'quasi-contractual' covers many real applications, and we give two as examples, the paid-up valuation principle and reversionary bonus on participating contracts. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2509_00011 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | A review of the Markov model of life insurance with a view to surplus Haçarız, Oytun Kleinow, Torsten Macdonald, Angus S. Pricing of Securities Probability We review Markov models of surplus in life insurance based on a counting process following Norberg (1991), uniting probabilistic theory with elements of practice largely drawn from UK experience. First, we organize models systematically based on one and two technical bases, including a suitable descriptive notation. Extending this to three technical bases to accommodate different valuation approaches leads us: (a) to expand the definition of 'technical basis' to include non-contractual cashflows recognized in the associated Thiele equation; and (b) to add new (mainly) systematic terms to the surplus. Making these cashflows dynamic or 'quasi-contractual' covers many real applications, and we give two as examples, the paid-up valuation principle and reversionary bonus on participating contracts. |
| title | A review of the Markov model of life insurance with a view to surplus |
| topic | Pricing of Securities Probability |
| url | https://arxiv.org/abs/2509.00011 |