Life Insurance Mathematics

Q&A session
Katrien Antonio

Faculty of Economics and Business

University of Amsterdam
k.antonio@uva.nl

October 19, 2022

Challenge week 6 on policy values

Ten years ago Jacob, then age 25, purchased a fully discrete 10-payment whole life policy
of 10 000. The ‘10-payment’ refers to 10 level premiums that were paid during the first
10 policy years, at the start of each year. All actuarial calculations for this policy were
based on the following:
● mortality follows the Illustrative Life Table, with 1 000 ⋅ A35 = 128.72.
● i = 0.06
● the actuarial equivalence principle.
L10 is the present value of future losses random variable at time 10.

At the end of policy year 10, the interest rate used to calculate L10 is changed to 0%.

Calculate the increase in E [L10 ] that results from this change.

Life Insurance Mathematics 2022, K. Antonio, UvA & KU Leuven 2/5

Question from tutorial week 3

Consider a special 10-year deferred, 25-year endowment insurance policy sold to Zack, age
40. The policy pays no benefit in case of death before age 50. A death benefit of 100
000 is payable at the time of death, in case of death between ages 50 and 75. In case of
survival to age 75, Zack will receive a benefit of 50 000. You are given:
● mortality follows the Illustrative Life Table
● i = 0.06.
● deaths are uniformly distributed over each year of age.
Calculate:
(a) the EPV of the benefit for this policy
(b) the probability that the PV of the benefit paid is less than 15 000 under this policy.

Life Insurance Mathematics 2022, K. Antonio, UvA & KU Leuven 3/5

Question from tutorial week 5

For a 20-year deferred annuity-due issued to (45) that pays 150 000 annually for life, you
are given:
● premiums of G are paid annually during the deferral period
● first year expenses are 40% of premium
● expenses for years 2 through 10 are 10% of premium
● expenses for years 11-20 are 5% of premium
● expenses are paid at the beginning of the year
● ä45∶10 = 6.25, ä55∶10 = 6.00 and ä65 = 7.4
● 10 E45 = 0.3 and 10 E55 = 0.27
● premiums are calculated using the equivalence principle.
Calculate G .

Life Insurance Mathematics 2022, K. Antonio, UvA & KU Leuven 4/5

Question from the 2021 final exam

We consider a fully discrete whole life insurance on (45), with death benefit of 250 000
EUR. Given are:
● expenses, payable at the start of each policy year, as follows:
% of premium per policy
First year 25% 2 EUR
Renewal years 5% 1 EUR
● A45 = 0.252
● i = 5%
● premiums are payable lifelong.
Calculate the yearly gross premium on this contract.

Life Insurance Mathematics 2022, K. Antonio, UvA & KU Leuven 5/5