Participating Policies: Risk and Value Drivers in a Financial Management Perspective

The complex risk system involving life insurance business, mainly life and pension annuities, requires a structured equipment of measurement and management tools, suitable to evaluate the policies’ performance within an ex-post perspective as well as within a forecasting context, consistently with the recent regulatory and accounting rules set up by the international supervisory associations and committees. The paper focuses on the impact of the financial risk sources on annuity contracts by working out on an ex-ante year by year analysis. The study specifically refers to the case of participating policies, which strongly suffer from the financial risk components, by developing a scenario analysis by means of numerical procedures. The analysis addresses a twofold goal: on the one hand it provides performance indicators based on the operating income, on the other hand it obtains managerial guidelines, within a risk-adjusted performance framework, apt to evaluate the participation rate.