Stochastic Analysis of Life Insurance Surplus

Natalia Lysenko successfully defended her M.Sc. project entitled "Stochastic Analysis of Life Insurance Surplus" on 28 July 2006.

The behavior of insurance surplus over time for a portfolio of homogenous life policies in an environment of stochastic mortality and rates of return is examine. We distinguish between stochastic and accounting surplus and derive their first two moments. A recursive formula is proposed for calculating the distribution function of the accounting surplus. We then examine the probability that the surplus becomes negative in any given insurance year. Numerical examples illustrate the results for portfolios of temporary and endowment life policies assuming an AR(1) process for the rates of return.

This was the first graduate defense in Actuarial Science in our Department.

This type of interdisciplinary work is a hallmark of our program in Applied Statistics at Simon Fraser University. For more information, please contact Natalia Lysenko (nlyskendo@sfu.ca) or her supervisor Gary Parker (gparker@stat.sfu.ca), Department of Statistics and Actuarial Science.

July 2006