An executive's handbook for understanding and risk managing unit linked guarantees

This paper discusses the sustainable management of risks embedded in guarantees attaching to unit linked savings and retirement contracts. In developing customer-centric guarantees that are not readily transferrable to the capital markets, insurance undertakings require the skills and resources to hedge the guarantees within their own balance sheet or with temporary packaged solutions such as reinsurance. In taking on the guarantee manufacture task insurers are departing from areas of historic competence and need to develop a comprehensive understanding of all elements of market risk replication.