Regulatory Alerts2013-12-19
Added · Updated
Application of the UFR in valuing profit-sharing schemes and options
Insurers are prohibited from letting forward rates separately converge to the Ultimate Forward Rate (UFR) in every interest rate scenario when valuing options and guarantees for the adequacy test. This restriction ensures consistency with the current yield curve used for discounting and aligns with the theorem of arbitrage-free pricing. Insurers must explain their valuation methods and may refer to the Good Practice – Adequacy Test for Life Insurers for guidance.
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