Underwriting Risks: Life Risk and Non-life Risk

René Doff

This chapter describes the underwriting risks. For a long time, the life and non-life industries were two relatively separate worlds, as their day-to-day practice differs and each has its own historical roots and legal backgrounds. Therefore, they will be described separately in this chapter. However, it will be shown that the control and calculation of economic capital for the life and non-life industry are closely related.

LIFE INSURANCE PRODUCTS

Life insurance is insurance that is coupled to the death or simple longevity of a person. It is an agreement to pay out a certain sum of money or value at a certain moment in the future. There is great diversity in life products and it would be beyond the scope of this book to run through all forms, so what follows is a short review.

Traditional life insurance products include endowment assurance, term assurance, life annuities and other hybrids. Pure endowment assurances pay out an amount when the person is still alive at a previously agreed moment, while term assurance provides a payment when a person dies before an agreed moment. Annuities pay out a series of amounts during a certain time period – for instance, until death