Dynamic policyholder behavior (DPB) and management actions (MA) are increasingly important aspects of modeling as more focus is placed on stochastic calculations and the tails of distributions. In particular, Solvency II in Europe specifies requirements for both DPB and MA, so we expect significant work being required of companies in these areas, particularly as this should form a key component of a company’s risk management. There is, however, little material available to guide companies and little clarity and consensus on approaches.

This report summarizes the results of a recent survey of current practice in the modeling of DPB and MA for life insurance business. Survey participants included major insurance companies across Europe, the US, and Japan.