The extrapolation conundrum

The extrapolation conundrum

extrapolation

Being able to predict future liabilities accurately is at the very heart of everything a life insurer does. But despite this, some fairly fundamental questions have not been addressed adequately within the Solvency II framework about how long-term cashflows should be valued – and this is making the insurance industry nervous.

The cornerstone to predicting future cashflows is working out the rate at which market instruments should be discounted, so as to derive the best approximation of market

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