An Overview of Regulatory Requirements
Sam Gutterman
Low Interest Rate Environments and Consequences
Risks Faced by Writers of Investment Guarantees
Variable Annuity in Asia post-2008
How did Variable Annuities Fare in the Crisis?
Traditional Life Insurance Products are Under Pressure
An Overview of Regulatory Requirements
Simulations
Economic Scenario Generators and Variable Annuities
Modelling and Managing Policyholder Behavioural Risks
Modelling and Managing Mortality and Longevity Risks
Valuation of Variable Annuity Guarantees
Understanding and Using Reinsurance Treaties for Guaranteed Products
Hedging of Long-term Fund-linked Exotic Options
Overview of Commonly Used Risk Management Strategies
Taxonomy of Equity, Interest Rate, Hybrid and Customised Derivatives Used for Risk Management
Managing Risks Underlying Variable Annuity Liabilities
Basis Risk
Measuring Hedge Effectiveness
Measuring and Reporting Hedge Efficiency
Eight Important Questions Practitioners Should Ask When Managing Equity-linked Insurance Guarantee Risks
This chapter will provide an overview of the regulation and regulatory issues associated with the sales and management of variable annuities (VAs). Due to their long-term nature, the fiduciary responsibility involved, the investment risks and guarantees included, their complexity and their similarity to certain other investment products (such as, in Europe, unitised with profit products), the regulation of VAs has played a crucial role in their development and evolution.
The fundamental concerns of regulators (in some cases referred to as supervisors, especially with respect to insurance companies) about these products are quite similar to their concerns regarding other products offered by life insurers, including:
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- assurance that promises made are kept and obligations are upheld;
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- their coverage and product features are suitable for the needs of their purchasers; and
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- due to their long-term nature and complexity, communication with clients, especially through insurers’ sales and service activities, is appropriate and clear.
To satisfy these concerns, regulators need adequate information to assess appropriately the performance of the
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