Submit Search
Upload
Variable Annuities
•
2 likes
•
595 views
13 Llama Interactive
Follow
Education
Business
Economy & Finance
Report
Share
Report
Share
1 of 21
Download now
Download to read offline
Recommended
Mf0018 insurance and risk management
Mf0018 insurance and risk management
smumbahelp
A project report on commodity futures and awareness level of commodity market...
A project report on commodity futures and awareness level of commodity market...
Babasab Patil
commodity market project
commodity market project
kartikganga
A project report on commodity market with special reference to gold at karvy...
A project report on commodity market with special reference to gold at karvy...
Babasab Patil
Awareness of commodity market a project report on mba finance
Awareness of commodity market a project report on mba finance
Babasab Patil
Finance projects topics
Finance projects topics
Babasab Patil
OKHIDIEVBIE OAMIEN ROY MANAGING DIRECTOR's Profile
OKHIDIEVBIE OAMIEN ROY MANAGING DIRECTOR's Profile
Roy Okhidievbie CPO, ADSOM, Msc. Fellow-IIPS
Jyotin Gambhir Arlington Works With Many Identity And Access Management Tools
Jyotin Gambhir Arlington Works With Many Identity And Access Management Tools
janetlouis
Recommended
Mf0018 insurance and risk management
Mf0018 insurance and risk management
smumbahelp
A project report on commodity futures and awareness level of commodity market...
A project report on commodity futures and awareness level of commodity market...
Babasab Patil
commodity market project
commodity market project
kartikganga
A project report on commodity market with special reference to gold at karvy...
A project report on commodity market with special reference to gold at karvy...
Babasab Patil
Awareness of commodity market a project report on mba finance
Awareness of commodity market a project report on mba finance
Babasab Patil
Finance projects topics
Finance projects topics
Babasab Patil
OKHIDIEVBIE OAMIEN ROY MANAGING DIRECTOR's Profile
OKHIDIEVBIE OAMIEN ROY MANAGING DIRECTOR's Profile
Roy Okhidievbie CPO, ADSOM, Msc. Fellow-IIPS
Jyotin Gambhir Arlington Works With Many Identity And Access Management Tools
Jyotin Gambhir Arlington Works With Many Identity And Access Management Tools
janetlouis
CFO Essentials Workshop - Los Angeles
CFO Essentials Workshop - Los Angeles
Ronit Koren
David R. Carothers
David R. Carothers
John Keller
Ming Chiu - Risk Management Expert - New York.pdf
Ming Chiu - Risk Management Expert - New York.pdf
Ming Chiu
Continental Advisory Services, Inc
Continental Advisory Services, Inc
jyahiayan
Total Financial Group –Specialists in Investments, Insurance, and Financial P...
Total Financial Group –Specialists in Investments, Insurance, and Financial P...
ronyeakes
Maven risk management services
Maven risk management services
Richard Mojel
2018 bks team sheet
2018 bks team sheet
Michael Ortoll
Final presentation
Final presentation
edrahtz
Risk all notes muj 4semester
Risk all notes muj 4semester
sachin kumar sharma
Risk managment ppt
Risk managment ppt
sachin kumar sharma
Understanding Risk Management Basics for Business Owners (Series: Business Pr...
Understanding Risk Management Basics for Business Owners (Series: Business Pr...
Financial Poise
Riskpro construction industry 2013
Riskpro construction industry 2013
Nidhi Gupta
Riskpro construction industry 2013
Riskpro construction industry 2013
Nidhi Gupta
Riskpro construction industry 2013
Riskpro construction industry 2013
Rahul Bhan (CA, CIA, MBA)
Jyotin Gambhir Arlington Has Extensive Knowledge of Information Security
Jyotin Gambhir Arlington Has Extensive Knowledge of Information Security
janetlouis
Wealth mgmt
Wealth mgmt
mitsdewest
CAS Brochure 4.1.16
CAS Brochure 4.1.16
Navil Smith
Ming Chiu - A Visionary and Ambitious Leader - New York.pdf
Ming Chiu - A Visionary and Ambitious Leader - New York.pdf
Ming Chiu
Amol Sahasrabudhe Individual Bio.pdf
Amol Sahasrabudhe Individual Bio.pdf
Amol Sahasrabudhe
Magesh Profile
Magesh Profile
Magesh D
13-anticipated-seo-job-interview-questions
13-anticipated-seo-job-interview-questions
13 Llama Interactive
Top 10 MS Excel Experts to follow in 2015
Top 10 MS Excel Experts to follow in 2015
13 Llama Interactive
More Related Content
Similar to Variable Annuities
CFO Essentials Workshop - Los Angeles
CFO Essentials Workshop - Los Angeles
Ronit Koren
David R. Carothers
David R. Carothers
John Keller
Ming Chiu - Risk Management Expert - New York.pdf
Ming Chiu - Risk Management Expert - New York.pdf
Ming Chiu
Continental Advisory Services, Inc
Continental Advisory Services, Inc
jyahiayan
Total Financial Group –Specialists in Investments, Insurance, and Financial P...
Total Financial Group –Specialists in Investments, Insurance, and Financial P...
ronyeakes
Maven risk management services
Maven risk management services
Richard Mojel
2018 bks team sheet
2018 bks team sheet
Michael Ortoll
Final presentation
Final presentation
edrahtz
Risk all notes muj 4semester
Risk all notes muj 4semester
sachin kumar sharma
Risk managment ppt
Risk managment ppt
sachin kumar sharma
Understanding Risk Management Basics for Business Owners (Series: Business Pr...
Understanding Risk Management Basics for Business Owners (Series: Business Pr...
Financial Poise
Riskpro construction industry 2013
Riskpro construction industry 2013
Nidhi Gupta
Riskpro construction industry 2013
Riskpro construction industry 2013
Nidhi Gupta
Riskpro construction industry 2013
Riskpro construction industry 2013
Rahul Bhan (CA, CIA, MBA)
Jyotin Gambhir Arlington Has Extensive Knowledge of Information Security
Jyotin Gambhir Arlington Has Extensive Knowledge of Information Security
janetlouis
Wealth mgmt
Wealth mgmt
mitsdewest
CAS Brochure 4.1.16
CAS Brochure 4.1.16
Navil Smith
Ming Chiu - A Visionary and Ambitious Leader - New York.pdf
Ming Chiu - A Visionary and Ambitious Leader - New York.pdf
Ming Chiu
Amol Sahasrabudhe Individual Bio.pdf
Amol Sahasrabudhe Individual Bio.pdf
Amol Sahasrabudhe
Magesh Profile
Magesh Profile
Magesh D
Similar to Variable Annuities
(20)
CFO Essentials Workshop - Los Angeles
CFO Essentials Workshop - Los Angeles
David R. Carothers
David R. Carothers
Ming Chiu - Risk Management Expert - New York.pdf
Ming Chiu - Risk Management Expert - New York.pdf
Continental Advisory Services, Inc
Continental Advisory Services, Inc
Total Financial Group –Specialists in Investments, Insurance, and Financial P...
Total Financial Group –Specialists in Investments, Insurance, and Financial P...
Maven risk management services
Maven risk management services
2018 bks team sheet
2018 bks team sheet
Final presentation
Final presentation
Risk all notes muj 4semester
Risk all notes muj 4semester
Risk managment ppt
Risk managment ppt
Understanding Risk Management Basics for Business Owners (Series: Business Pr...
Understanding Risk Management Basics for Business Owners (Series: Business Pr...
Riskpro construction industry 2013
Riskpro construction industry 2013
Riskpro construction industry 2013
Riskpro construction industry 2013
Riskpro construction industry 2013
Riskpro construction industry 2013
Jyotin Gambhir Arlington Has Extensive Knowledge of Information Security
Jyotin Gambhir Arlington Has Extensive Knowledge of Information Security
Wealth mgmt
Wealth mgmt
CAS Brochure 4.1.16
CAS Brochure 4.1.16
Ming Chiu - A Visionary and Ambitious Leader - New York.pdf
Ming Chiu - A Visionary and Ambitious Leader - New York.pdf
Amol Sahasrabudhe Individual Bio.pdf
Amol Sahasrabudhe Individual Bio.pdf
Magesh Profile
Magesh Profile
More from 13 Llama Interactive
13-anticipated-seo-job-interview-questions
13-anticipated-seo-job-interview-questions
13 Llama Interactive
Top 10 MS Excel Experts to follow in 2015
Top 10 MS Excel Experts to follow in 2015
13 Llama Interactive
Claritas Investment Certificate By CFA Institute
Claritas Investment Certificate By CFA Institute
13 Llama Interactive
#CFA: Revise entire CFA syllabus 6 days-Alt. Inv., Portfolio Mgt., Derivatives
#CFA: Revise entire CFA syllabus 6 days-Alt. Inv., Portfolio Mgt., Derivatives
13 Llama Interactive
#CFA: Revise entire CFA syllabus 6 days- Quants
#CFA: Revise entire CFA syllabus 6 days- Quants
13 Llama Interactive
#CFA: Understanding competitive analysis
#CFA: Understanding competitive analysis
13 Llama Interactive
Financial Modeling: Market Entry Strategy
Financial Modeling: Market Entry Strategy
13 Llama Interactive
#Financial Modeling: Growing needs of financial modeling skills in financial ...
#Financial Modeling: Growing needs of financial modeling skills in financial ...
13 Llama Interactive
CFA vs FRM
CFA vs FRM
13 Llama Interactive
Perspectives from Buy Side
Perspectives from Buy Side
13 Llama Interactive
#CFA: Revise entire CFA syllabus 6 days-Equity & Fixed Income
#CFA: Revise entire CFA syllabus 6 days-Equity & Fixed Income
13 Llama Interactive
#CFA: Revise entire CFA syllabus 6 days-Economics
#CFA: Revise entire CFA syllabus 6 days-Economics
13 Llama Interactive
#CFA:Revise entire CFA syllabus 6 days-FSA
#CFA:Revise entire CFA syllabus 6 days-FSA
13 Llama Interactive
#CFA: Revise entire CFA syllabus 6 days:Ethics and Corporate Finance
#CFA: Revise entire CFA syllabus 6 days:Ethics and Corporate Finance
13 Llama Interactive
FRM I Webinar
FRM I Webinar
13 Llama Interactive
#FRM:Important Topics to Remember Before FRM-I Exam
#FRM:Important Topics to Remember Before FRM-I Exam
13 Llama Interactive
Balance sheet
Balance sheet
13 Llama Interactive
Investing_EduPristine_template
Investing_EduPristine_template
13 Llama Interactive
Variable Annuities
Variable Annuities
13 Llama Interactive
Alm & basle iii webinar
Alm & basle iii webinar
13 Llama Interactive
More from 13 Llama Interactive
(20)
13-anticipated-seo-job-interview-questions
13-anticipated-seo-job-interview-questions
Top 10 MS Excel Experts to follow in 2015
Top 10 MS Excel Experts to follow in 2015
Claritas Investment Certificate By CFA Institute
Claritas Investment Certificate By CFA Institute
#CFA: Revise entire CFA syllabus 6 days-Alt. Inv., Portfolio Mgt., Derivatives
#CFA: Revise entire CFA syllabus 6 days-Alt. Inv., Portfolio Mgt., Derivatives
#CFA: Revise entire CFA syllabus 6 days- Quants
#CFA: Revise entire CFA syllabus 6 days- Quants
#CFA: Understanding competitive analysis
#CFA: Understanding competitive analysis
Financial Modeling: Market Entry Strategy
Financial Modeling: Market Entry Strategy
#Financial Modeling: Growing needs of financial modeling skills in financial ...
#Financial Modeling: Growing needs of financial modeling skills in financial ...
CFA vs FRM
CFA vs FRM
Perspectives from Buy Side
Perspectives from Buy Side
#CFA: Revise entire CFA syllabus 6 days-Equity & Fixed Income
#CFA: Revise entire CFA syllabus 6 days-Equity & Fixed Income
#CFA: Revise entire CFA syllabus 6 days-Economics
#CFA: Revise entire CFA syllabus 6 days-Economics
#CFA:Revise entire CFA syllabus 6 days-FSA
#CFA:Revise entire CFA syllabus 6 days-FSA
#CFA: Revise entire CFA syllabus 6 days:Ethics and Corporate Finance
#CFA: Revise entire CFA syllabus 6 days:Ethics and Corporate Finance
FRM I Webinar
FRM I Webinar
#FRM:Important Topics to Remember Before FRM-I Exam
#FRM:Important Topics to Remember Before FRM-I Exam
Balance sheet
Balance sheet
Investing_EduPristine_template
Investing_EduPristine_template
Variable Annuities
Variable Annuities
Alm & basle iii webinar
Alm & basle iii webinar
Recently uploaded
Alper Gobel In Media Res Media Component
Alper Gobel In Media Res Media Component
InMediaRes1
_Math 4-Q4 Week 5.pptx Steps in Collecting Data
_Math 4-Q4 Week 5.pptx Steps in Collecting Data
JhengPantaleon
The Most Excellent Way | 1 Corinthians 13
The Most Excellent Way | 1 Corinthians 13
Steve Thomason
POINT- BIOCHEMISTRY SEM 2 ENZYMES UNIT 5.pptx
POINT- BIOCHEMISTRY SEM 2 ENZYMES UNIT 5.pptx
Sayali Powar
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
Marc Dusseiller Dusjagr
Organic Name Reactions for the students and aspirants of Chemistry12th.pptx
Organic Name Reactions for the students and aspirants of Chemistry12th.pptx
VS Mahajan Coaching Centre
Staff of Color (SOC) Retention Efforts DDSD
Staff of Color (SOC) Retention Efforts DDSD
David Douglas School District
9953330565 Low Rate Call Girls In Rohini Delhi NCR
9953330565 Low Rate Call Girls In Rohini Delhi NCR
9953056974 Low Rate Call Girls In Saket, Delhi NCR
Presiding Officer Training module 2024 lok sabha elections
Presiding Officer Training module 2024 lok sabha elections
anshu789521
Solving Puzzles Benefits Everyone (English).pptx
Solving Puzzles Benefits Everyone (English).pptx
OH TEIK BIN
The basics of sentences session 2pptx copy.pptx
The basics of sentences session 2pptx copy.pptx
heathfieldcps1
Separation of Lanthanides/ Lanthanides and Actinides
Separation of Lanthanides/ Lanthanides and Actinides
FatimaKhan178732
Model Call Girl in Bikash Puri Delhi reach out to us at 🔝9953056974🔝
Model Call Girl in Bikash Puri Delhi reach out to us at 🔝9953056974🔝
9953056974 Low Rate Call Girls In Saket, Delhi NCR
How to Configure Email Server in Odoo 17
How to Configure Email Server in Odoo 17
Celine George
Kisan Call Centre - To harness potential of ICT in Agriculture by answer farm...
Kisan Call Centre - To harness potential of ICT in Agriculture by answer farm...
Krashi Coaching
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
Celine George
Enzyme, Pharmaceutical Aids, Miscellaneous Last Part of Chapter no 5th.pdf
Enzyme, Pharmaceutical Aids, Miscellaneous Last Part of Chapter no 5th.pdf
Sumit Tiwari
Mastering the Unannounced Regulatory Inspection
Mastering the Unannounced Regulatory Inspection
SafetyChain Software
Hybridoma Technology ( Production , Purification , and Application )
Hybridoma Technology ( Production , Purification , and Application )
Sakshi Ghasle
Paris 2024 Olympic Geographies - an activity
Paris 2024 Olympic Geographies - an activity
GeoBlogs
Recently uploaded
(20)
Alper Gobel In Media Res Media Component
Alper Gobel In Media Res Media Component
_Math 4-Q4 Week 5.pptx Steps in Collecting Data
_Math 4-Q4 Week 5.pptx Steps in Collecting Data
The Most Excellent Way | 1 Corinthians 13
The Most Excellent Way | 1 Corinthians 13
POINT- BIOCHEMISTRY SEM 2 ENZYMES UNIT 5.pptx
POINT- BIOCHEMISTRY SEM 2 ENZYMES UNIT 5.pptx
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
“Oh GOSH! Reflecting on Hackteria's Collaborative Practices in a Global Do-It...
Organic Name Reactions for the students and aspirants of Chemistry12th.pptx
Organic Name Reactions for the students and aspirants of Chemistry12th.pptx
Staff of Color (SOC) Retention Efforts DDSD
Staff of Color (SOC) Retention Efforts DDSD
9953330565 Low Rate Call Girls In Rohini Delhi NCR
9953330565 Low Rate Call Girls In Rohini Delhi NCR
Presiding Officer Training module 2024 lok sabha elections
Presiding Officer Training module 2024 lok sabha elections
Solving Puzzles Benefits Everyone (English).pptx
Solving Puzzles Benefits Everyone (English).pptx
The basics of sentences session 2pptx copy.pptx
The basics of sentences session 2pptx copy.pptx
Separation of Lanthanides/ Lanthanides and Actinides
Separation of Lanthanides/ Lanthanides and Actinides
Model Call Girl in Bikash Puri Delhi reach out to us at 🔝9953056974🔝
Model Call Girl in Bikash Puri Delhi reach out to us at 🔝9953056974🔝
How to Configure Email Server in Odoo 17
How to Configure Email Server in Odoo 17
Kisan Call Centre - To harness potential of ICT in Agriculture by answer farm...
Kisan Call Centre - To harness potential of ICT in Agriculture by answer farm...
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
Incoming and Outgoing Shipments in 1 STEP Using Odoo 17
Enzyme, Pharmaceutical Aids, Miscellaneous Last Part of Chapter no 5th.pdf
Enzyme, Pharmaceutical Aids, Miscellaneous Last Part of Chapter no 5th.pdf
Mastering the Unannounced Regulatory Inspection
Mastering the Unannounced Regulatory Inspection
Hybridoma Technology ( Production , Purification , and Application )
Hybridoma Technology ( Production , Purification , and Application )
Paris 2024 Olympic Geographies - an activity
Paris 2024 Olympic Geographies - an activity
Variable Annuities
1.
Variable Annuities Risk Management Challenges © EduPristine – www.edupristine.com
2.
About the speaker Sougata Roy FSA, CFA, MBA (IIM‐Indore) Sougata Roy has several years of experience in US insurance industry. His primary area of expertise is Enterprise Risk Management in insurance industry context. He has extensive work experience in Asset Liability Management, Hedging of insurance liabilities, Market risk management, Economic Capital framework and Market Consistent framework. He has experience working in some of the top insurance carriers in US namely The Hartford, Lincoln Financial Group and Old Mutual US. Sougata is a qualified actuary from Society of Actuaries, USA and a CFA charter holder. He also has an MBA from Indian Institute of Management, Indore and a bachelor degree in Electronics & Telecommunications Engineering from Bengal Engineering College, Shibpore. Linkedin: http://www.linkedin.com/pub/sougata‐roy‐fsa‐cfa/7/432/87 © EduPristine | (Confidential) 2
3.
Disclaimer • • The views expressed in this presentation are those of the presenter, and not those of the presenter’s employer. This presentation is intended solely for educational purposes and presents information of a general nature. It is not intended to guide or determine any specific individual situation and persons should consult qualified professionals before taking specific investment actions. © EduPristine | (Confidential) 3
4.
Topics • Introduction to Equity Based Insurance Guarantees • Managing the risks – Traditional Approaches – Recent Developments • Risk Management Challenges • Equity Based Insurance Guarantees in Indian context © EduPristine | (Confidential) 4
5.
Introduction to Equity Based Insurance Guarantees – Death Benefits • Guaranteed amount in case of policyholder’s death during the term of a contract –
Living Benefits (GMAB, GMWB and GMIB) • GMAB: Guaranteed sum at the maturity of the contract • GMIB: Guaranteed floor of income at the end of holding period • GMWB: Guaranteed return of premium over time – Index Annuities • Participation in equity market with a floor and a cap – Variable Universal Life • Universal life with flexibility to participate in equity market © EduPristine | (Confidential) 5
6.
Some Illustrations © EduPristine | (Confidential) ** Charts are
from Morningstar Report Titled “Living Benefits” 6
7.
Insurer Perspective Each policy in VA with guaranteed benefit rider becomes a short put option with different – Strike (Guarantee Amount) – Underlying (Fund Value which depends upon investment allocation) –
Maturity (Contingent upon living) Insurance Policy + Capital Market Security © EduPristine | (Confidential) 7
8.
Managing Risk • Mortality and Lapse – Determines the maturity of the option written by insurer – Policyholder behavior is a key factor •
Depends upon age, sex, economic background and various other factors • Modeling is more art than science • Some insurers use predictive modeling for this © EduPristine | (Confidential) 8
9.
Managing Risk • Guarantees – Some insurers decided to not hedge guarantees • Almost all of them are out of VA business now –
Reinsurance • Not many reinsurer in the market after financial crisis – Dynamic hedging • Replicate the payoff using available exchange traded and over the counter derivative • Primarily three greek strategy – delta, vega, rho © EduPristine | (Confidential) 9
10.
Typical Dynamic Hedging Program • Replicates liability and rebalances hedge portfolio based on market movements End of Day Market Data Stochastic Scenario Generator (RN) Liability Model Asset Models Database/Reporting Engine Trading Floor (Rebalancing) P&L Report, Attribution Rebalancing based on Greeks coverage Greek Delta Equity futures, Total Return Swaps, Vanilla Options Rho IR futures, IR Swaps Vega © EduPristine | (Confidential) Typical Instruments Used Vanilla Options, Variance Swaps 10 Actuarial Assumptions
11.
Challenges With Dynamic Hedging • Unmitigated Risks – Greeks other than Delta, Vega, Rho – Higher order greeks • Pricing –
Inadequate hedge cost assumption • Basis Risk – Difference between hedge indices and fund performance © EduPristine | (Confidential) 11
12.
Challenges With Dynamic Hedging • Liquidity – Bid‐Ask widens in stress markets • Counterparty risk – Credit risk in OTC contracts • Systemic failure • Controls and Execution “Perfect Storm” in during financial crisis © EduPristine | (Confidential) 12
13.
And then there is Accounting… • Wide difference in accounting standards related to valuation of hedge instruments and liability • What are you trying to hedge? – Stat Earnings? – GAAP Earnings? –
Economics? • Unfortunately you can pick only one © EduPristine | (Confidential) 13
14.
Some knee jerk reactions… • Increased price of guarantees – Higher premium for writing the option • Reduced benefits – Lower strike of the put option • Restrict equity allocation –
Lowering the notional © EduPristine | (Confidential) 14
15.
Recent Developments… • Indexing fees to Volatility – Reduces the risk of undercharging hedge cost • Volatility Managed Funds – Dynamic allocation based on volatility of the index –
Overlaying derivatives in the fund © EduPristine | (Confidential) 15
16.
Volatility Managed Funds • Allocation between equity and bond changes to target a constant volatility (subject to cap) – Reduces Vega exposure significantly – Generally there is higher alpha • Does not impact Delta or Rho –
So you still need a dynamic hedging program • This is steadily gaining popularity © EduPristine | (Confidential) 16
17.
Equity Linked Insurance Market in India • There is obviously a market for these products – It is set to expand as some early “Gen‐X” approaches retirement in next 5‐7 years • First generation ULIP has disappeared from market post 2010 • Highest NAV guaranteed ULIP became largest selling ULIP since Sep 2010 – – – – CPPI Strategy Not aligned to stock index Can get cash locked IRDA has banned those products starting Oct to stop misselling © EduPristine | (Confidential) 17
18.
Equity Linked Insurance Market in India • To expand, further innovation are required – Managed volatility funds can be a potential candidate • Development of derivative market – To be able to dynamically hedge market risk • Regulatory approvals for derivative usage © EduPristine | (Confidential) 18
19.
Key Points… • VA Guarantees are complex – Can be viewed as exotic derivative contracts – Needs dynamic hedging for risk management • Issues with dynamic hedging –
Accounting issues – Basis, Liquidity and Counterparty – Unaccounted risks • Recent Developments in US market – Managed volatility funds – Volatility indexed fees • Indian market – High potential – Needs further development in derivative markets – Managed volatility fund can be a good option © EduPristine | (Confidential) 19
20.
QUESTIONS? © EduPristine | (Confidential) 20
21.
Thank You ! Visit Us On: http://www.edupristine.com/ca Contacts Us: help@edupristine.com © EduPristine – www.edupristine.com
Download now