Valuing an insurance balance sheet is a complex exercise that requires the use of stochastic economic scenarios. For best estimate of liabilities (BEL) and present value of future profits, there’s a need to develop techniques to ensure their stochastic valuation converges toward their true values. One potential solution is to enhance the random number generator (RNG) used to generate the stochastic economic scenarios. In this paper, we:
- Present a new RNG
- Demonstrate its efficiency over existing RNGs for the valuation of stochastic BEL
- Discuss the need for universal and interpretable validation strategies for martingale tests for such types of RNG
A new hybrid Random Number Generator for more accurate valuation of insurance liabilities
Increasing use of stochastic economic scenarios for valuation of liabilities has put more pressure on the operational process of carriers, but the RNG can help.
Hervé Andrès, Pierre-Edouard Arrouy, Paul Bonnefoy, Alexandre Boumezoued