Underwriting risk | Underwriting risks comprise biometric risks (mortality, longevity and disability) on the one hand and the unpredictability of customer behaviour (surrenders and capital options) on the other.
The underwriting parameters such as mortality, disability and cancellation rates are determined on the basis of in-house data from the past and partly on external statistics. These parameters in turn form the basis for the setting of premium rates and the evaluation of insurance portfolios. There is currently a special focus on the future development of life expectancy, which represents a great challenge in connection with pension products and in particular occupational pension business in Switzerland. The fact that the parameters for the evaluation of future business build on historic data gives rise to a parameter risk. In order to assess this risk, various sensitivity analyses deliberately deviate from the best-possible estimates for biometric parameters so as to take into account the impact of additional factors on the evaluations. In addition, simulations are carried out applying extreme scenarios and their impact on business activities. A pandemic, for instance, is not only modelled by adjusting the relevant underwriting parameters, but also by taking into account their possible influence on the capital markets. These considerations enable the company to determine the insurance risk capital.
