Understanding policyholder behaviour is crucial to the success of ALM and replicating portfolio strategies

Born of interest rate volatility, dynamic policyholder behaviour is a variable no insurer can afford to ignore – yet modelling it is problematic. How are companies adapting to the new market conditions?

Offering policyholders a share of the profits of investment has long been a popular way of attracting life insurance business in Europe. Indeed, some companies in a number of European countries, such as Italy, Germany and France, have gone a step further, guaranteeing their policyholders a minimum value should they choose to surrender their policies. In the previous era – of relatively stable and benign economic conditions and markets, and a less risk-oriented approach to solvency – such