The Monte Carlo Simulation Study Of Pure Premium On Condition Of Random Interest Rates

With the complete opening to the world in the end of 2006, Chinese Insurance business entered a completely new phase. No matter we concern the insurance depth or density, our country is in a low level in the world. The entrance of foreign insurance companies makes Chinese Insurance business more competitive. Half of the foreign companies have begun to increase the investment and exploit new disease, and in this way, they intend to expand their business in China more deeply. Till May in 2007, foreign companies have set up new offset institutions in more than twenty Chinese cities, they expand their business to hinterland of the east, middle and west area, and accordingly foreign insurance companies emerge in Hunan and Henan province. Meanwhile, foreign companies are not satisfied to merely engage the direct business of the insurance market, they set up more than ten service agencies to purse insurance broker, insurance evaluation and insurance surrogate. At the same time about ten insurance companies from seven countries set up delegate institutions in important cities of China. Take Shandong for example, till August in 2006, there have been six foreign insurance companies such as Xincheng insurance, Hengan standard life and Haikang insurance. It's more important to advance actuary level, strengthen international competition and enhance the capacity to resist the hazard.To predigest the calculation, interest rate is often assumed to be a fixed value in traditional actuarial theory. But because guarantee slip contract is a long-term economic behavior, many factors such as government policy and economy cycle will bring about the uncertainty of interest rate, the study on insurance premium under stochastic interest rate gradually becomes one of hotspots in actuary theory.In this paper, we analyze the advantages and disadvantages of the calculation of life insurance premium under traditional fixed interest rate, introduce a typical method"New York interest rate seven scenarios"among Scenario Analysis, set up AR(1) model of interest rate, and realize Scenario Analysis of interest rate in Matlab, verify the validity of interest rate model, based on this we actualize Monte Carlo simulation of pure insurance premium. In the end of the paper we take Guoshou Furui Satisfactory Both Sides insurance advanced by China Life Insurance Company for example to realize example analysis of this method. The Monte Carlo Pure Premium Simulation method is an improvement over the Scenario Analysis method. It compensates the deficiencies in Scenario Analysis and is able to retrieve more insights than we are able to get otherwise.