Variable Annuity in Asia post-2008
Hugo Choi
Low Interest Rate Environments and Consequences
Risks Faced by Writers of Investment Guarantees
Variable Annuity in Asia post-2008
How did Variable Annuities Fare in the Crisis?
Traditional Life Insurance Products are Under Pressure
An Overview of Regulatory Requirements
Simulations
Economic Scenario Generators and Variable Annuities
Modelling and Managing Policyholder Behavioural Risks
Modelling and Managing Mortality and Longevity Risks
Valuation of Variable Annuity Guarantees
Understanding and Using Reinsurance Treaties for Guaranteed Products
Hedging of Long-term Fund-linked Exotic Options
Overview of Commonly Used Risk Management Strategies
Taxonomy of Equity, Interest Rate, Hybrid and Customised Derivatives Used for Risk Management
Managing Risks Underlying Variable Annuity Liabilities
Basis Risk
Measuring Hedge Effectiveness
Measuring and Reporting Hedge Efficiency
Eight Important Questions Practitioners Should Ask When Managing Equity-linked Insurance Guarantee Risks
The 2008 global financial crisis, more commonly referred to in the region as the “Lehman shock”, was a watershed for variable annuities (VA) in Asia. Massive negative results forced companies to become run-off or at least to rethink their variable annuity strategy. Development of VA also slowed down in many countries as players realised the problems caused by running improper risk management. However, after a few years of consolidation, a new generation of variable annuities has developed in Japan, products that can be managed much more efficiently by insurance companies while at the same time do not reduce product attractiveness.
This chapter will focus on the development of the VA markets in Asia post-2008. In particular, the focus will be on Japan, not only because it is the biggest variable annuity market in Asia, but also due to the evolution of product features, the interaction between VA and other saving products in sales channels and how the risk management of insurance companies can serve as an interesting case study concerning how variable annuities can be turned around and regain volume after a financial crisis without compromising risk management.
In this chapter
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