Study Data from Sun Yat Sen University Update Knowledge of Insurance Economics (Early default risk and surrender risk: Impacts on participating life…

Study Data from Sun Yat Sen University Update Knowledge of Insurance Economics (Early default risk and surrender risk: Impacts on participating life insurance policies)

By a News Reporter-Staff News Editor at Insurance Weekly News -- Investigators discuss new findings in Economics - Insurance Economics. According to news reporting originating from Guangdong, People's Republic of China, by VerticalNews correspondents, research stated, "We study the risk-neutral valuation of participating life insurance policies with surrender guarantees when an early default mechanism, forcing an insurance company to be liquidated once a solvency threshold is reached, is imposed by a regulator. The early default regulation affects the policies' value not only directly via changing the policies' payment stream but also indirectly via influencing policyholder's surrender."

Our news editors obtained a quote from the research from Sun Yat Sen University, "In this paper, we endogenize surrender risk by assuming a representative policyholder's surrender intensity bounded from below and from above and uncover the impact of the regulation on the policyholder's surrender decision making. A partial differential equation is derived to characterize the price of a participating policy and solved with the finite difference method."

According to the news editors, the research concluded: "We discuss the impacts of the early default regulation and insurance company's reaction to the regulation in terms of its investment strategy on the policyholder's surrender as well as on the contract value, which depend on the policyholder's rationality level."

For more information on this research see: Early default risk and surrender risk: Impacts on participating life insurance policies. Insurance Mathematics & Economics, 2018;78():30-43. Insurance Mathematics & Economics can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands.

The news editors report that additional information may be obtained by contacting C.L. Cheng, Sun Yat Sen UniversityLingnan Univ College, Guangzhou 510275, Guangdong, People's Republic of China.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.insmatheco.2017.11.001. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

Keywords for this news article include: Guangdong, People's Republic of China, Asia, Insurance Economics, Economics, Insurance Companies, Sun Yat Sen University.

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