Mortality profit

Question 1

Death Strain at risk

Answer 1

The death strain at risk (DSAR)= S - (t+1)V (i.e. the excess of the sum assured over the policy value/reserve at time t+1. Thus can be interpreted as the strain on the asset caused by a claim (due to the deaths in this case)

Question 2

Expected death strain

Answer 2

The amount that the life insurance company expects to pay in addition to the year end reserve for the policy. The probability of claiming in the policy year t to t+1 is q(x+t) so that EDS= q(x+t)* (S-(t+1)V)

Question 3

Actual death strain

Answer 3

The observed value at t+1 of the death strain random variable

Question 4

Mortality profit

Answer 4

Expected death strain - actual death strain.
The EDS is the amount the company expects to pay out, in addition to the year and reserve for a policy. The ATS is the amount it actually pays out in addition to the year in reserve. If it actually pays out less than expected to pay they will be a profit. The actual strain is greater than expected strain there will be a loss