Question: There seem to be some potential problems in valuing ULG's. I mean, the non-financial risk is a concern, there is no (what I am aware of) market for mortality exposure and longevity? If the benefits are linked to such events in a non-Symantec way, will finding market prices prove problematic?
Answer: Mark Hayhoe There are a number of risks that we, as providers, take into account when pricing and managing ULGs. The capital market risks include changes in asset value; changes in interest rates; volatility in asset values; interactions between risks; lesser order effects etc. These risks can be managed by purchasing financial instruments which increase in value to match a corresponding increase in value of the guarantees. These financial instruments have to be regularly adjusted and re-balanced to take account of movements in our book of business. You are correct that ...
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