DETERMINATION OF LIFE ENDOWMENT INSURANCE PREMIUMS RESERVES THROUGH THE COX INGERSOLL ROSS RATE INTEREST MODEL

• Main Author: Karnela Korin, Kenza
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/69039
• Institution: Institut Teknologi Bandung

Endowment insurance has the benefits of life protection and savings funds. The endowment insurance premium paid by the policyholder is divided into two places, partly for buying life insurance and partly for savings. This endowment insurance benefit helps policyholders to save in a disciplined manner while transferring risk. Premium reserves are the insurance company's obligation to policyholders in the form of a number of funds that the insurance company must prepare to pay claims in the future. The determination of premium reserves is influenced by several factors, including the mortality table and interest rates. In this final project, the Indonesian Mortality Table III and IV with the CIR stochastic interest rate model are used in determining the reserve for 10-year endowment insurance premiums. Based on Bank Indonesia interest rates from 1995 to 2022, the parameters of the CIR model are estimated using the conditional least squares method. These parameters are the average long-term interest rate, the speed at which interest rates reach the equilibrium point, and volatility which describes the movement of interest rates. From the numerical simulation using the prospective and Zillmer method, it is seen that the prospective premium reserve is always higher than the Zillmer premium reserve.