Study On The Impact Of Policyholder Behavior On Hedging Of Guaranteed Benefits In Variable Annuities

With the growing fastest population aging,now China has the greatest number ofaging people in the world.Chinese are suffering great pension pressure.To enrich theendowment insurance products and meet the demand of consumers,China InsuranceRegulatory Commission （CIRC） starts the pilot program on variable annuities inBeijing,Shanghai and other three places in May2011.Variable annuities are risky andare adversely affected in the financial crisis,which made many well-knowninternational insurance companies suffered great deficit.It is the key point to considerhow to control the risk when bringing in variable annuities.And among the riskinsurance companies face offering variable annuities,policyholder behavior is a vitalfactor. It is important for our country to make sure what impact will be made bypolicyholder behavior to hedging these variable annuities.This thesis first describes the definition and features of variable annuities andGMDB,GMMB and GMWB.Then use numerical analysis to demonstrate the operationprocess of variable annuities. Later this paper introduces the main risk factors ofvariable annuities,describes several common risk management methods and presentspolicyholder behavior and its impact.At last,the paper gives the pricing and hedgingmodel considering policyholder behavior.Monte Carlo method is used to simulate thesolution of pricing and hedging.The thesis considers policyholders only take thestrategy of no surrender,deterministic surrender and In-The-Moneyness and analysesthe impact of it to the hedging of GMDB,GMMB and GMWB.This paper analyse s theinfluence of policyholder behavior qualitatively and quantitatively,while thesimulation results are in accordance with the actual situation.