Analysis On The Solvency Of Periodic Life Insurance Business

The solvency of a life insurance company is its capacity to fulfill its due responsibility according to the contracts at any time. The adequacy of solvency has strong relationships with many important factors, from the business qualification of an insurance company, whether it can satisfy its promise to the policyholders, to the healthy and sustainable development of the whole insurance industry. Solvency is very important to many parties involved, no matter the government regulator, the existing or prospective policyholders, or the insurance company itself. However, there are so many influential factors to be considered which result in complicated process and high cost. As a result, what is evaluated in practice is the solvency margin, an integrated index of solvency.In this paper, we construct an optimal solvency margin model with respect to the traditional term insurance business. And we’ll prove the existence and uniqueness of the solution of this optimal problem. However, from a statistical point of view, mortality is not the only risk which affect the solvency of term insurance. Interest rate, expense and other risks will also influence solvency. Therefore, after we got the optimal solution, we continued to analyse the solution’s sensitivity for various risks.