DETERMINATION OF PREMIUMS RESERVES USING THE STOCHASTIC INTEREST RATES
Premium reserve is a sum of money collected by the insurance company which is obtained from difference in the value of the compensation with the cash value of the payment at a time of insurance in preparation for payment of claims. The determination of the premium reserve is be affected by several f...
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| Format: | Theses |
| Language: | Indonesia |
| Online Access: | https://digilib.itb.ac.id/gdl/view/55116 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Premium reserve is a sum of money collected by the insurance company which is obtained from difference in the value of the compensation with the cash value of the payment at a time of insurance in preparation for payment of claims. The determination of the premium reserve is be affected by several factors, one of which is interest rates fluctuation. In this study, stochastic interest rates are modeled through the Vasicek and CIR models. Based on the average Bank Indonesia interest rates for the period 1995-2021, the Vasicek and CIR model parameters are estimated using the maximum likelihood method. These parameters are the velocity of interest rates to equilibrium point, long-term average interest rates, and interest rate volatility. The stochastic interest rate in these two models used to calculate premium reserves for joint life insurance cases. The interest rate will be used in calculating the premium and reserves value for the 25 years term life insurance on company data. Other data used is the insurance data of XYZ company that filed a claim in 2020. Prospective reserve calculation using the CIR model produces a greater value than the Vasicek model, it also affects the value of Zillmer reserves in the CIR model, which has a reserve value that is greater than the Vasicek model. |
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