Highlights on SOA report “Reinvestment Strategies for Life Insurance Products in a Changing Economic Environment”

Life insurance annuities are in force for many years and contain embedded options of very long duration, during which periods of rapid economic change and sustained extreme economic conditions can occur. We investigate possible reinvestment strategies for life insurance companies experiencing periods of such change. We propose a dynamic approach where year by year the reinvestment strategy is defined to maximize the expected result of the following year, taking into account its conditional tail expectation.