Projecting the Solvency Capital Requirements for Annuities
Document ID: 2007-749 (previously 2007/009)
Published on: 30th September 2007
Author: Delme Pritchard
This research note looks at two methods for projecting the SCR for annuities. One method, as suggested by the CRO Forum doesn’t capture the nature of the longevity risk underlying annuity liabilities and may underestimate the MVM by up to 40% . It also turns out that using the second, slightly more realistic, method leads to possibly counter intuitive results –the projected SCRs initially increase through time, before decreasing. This effect is investigated and shown to be a genuine feature of the method chosen to project the SCRs.
