Assumptions

Question 1

Assumptions needed to project forward profits in each future year for a life insurer

Answer 1

• Premium rates per policy
• Sales volumes and mix of business
• Investment returns
• Expense levels
• Expense inflation
• Commission rates
• Mortality rates
• Morbidity rates
• Withdrawal rates
• Separate assumptions to calculate provisions (which may be more prudent than those used above)
• Solvency capital requirements
• Tax returns
• Reinsurance premium rates and recovery rates

Question 2

Demographic factors (assumptions) needed for a pension scheme model

Answer 2

• rates of retirement in good health
• rates of ill-health retirement
• rates of withdrawal
• new entrant rates
• rate of mortality before and after retirement
• proportion married
• average age of spouses
• spouses’ mortality
• salary scale (ie promotional increases)

Question 2

Demographic factors (assumptions) needed for a pension scheme model

Answer 2

• rates of retirement in good health
• rates of ill-health retirement
• rates of withdrawal
• new entrant rates
• rate of mortality before and after retirement
• proportion married
• average age of spouses
• spouses’ mortality
• salary scale (ie promotional increases)

Question 3

Economic factors (assumptions) needed for a pension scheme model

Answer 3

• expenses - Ex
• pension increases - Pe
• discount rate (for valuing liabilities) - D
• investment returns - I
• earnings inflation- Tion from inflaTion
• price inflation -Tion

ExPeDITion

dividend yield is another economic assumption but not for pensions

Question 4

List 6 factors other than age and gender that directly affect mortality and