Valuation of life insurance contracts using stochastic mortality rate and risk process modeling

Thesis Type: Post Graduate

Institution Of The Thesis: Middle East Technical University, Turkey

Approval Date: 2007

Thesis Language: English

Student: Şirzat Çetinkaya



In life insurance contracts, actuaries generally value premiums using deterministic mortality rates and interest rates. They have ignored them stochastically in most of the studies. However it is known that neither interest rates nor mortality rates are constant. It is also known that companies may encounter insolvency problems such as ruin, so the ruin probability need to be added to the valuation of the life insurance contracts process. Insurance companies should model their surplus processes to price some types of life insurance contracts and to see risk position. In this study, mortality rates and surplus processes are modeled and financial strength of companies are utilized when pricing life insurance contracts.