US insurers overhaul lapse risk assumptions
Switch to predictive models to provide better understanding of risk
US insurers are refining their lapse and policyholder behaviour assumptions for variable annuity (VA) portfolios, in an effort to improve the robustness of their risk models.
A number of US insurers have already revealed improvements to lapse models in their second quarter 2013 earnings reports and investors' conferences. For instance, Lincoln Financial - which recorded $441 million of income from VAs in 2012 - recently installed a predictive model to estimate lapse risk, with sensitivities to
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