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IAI Actuarial Core Principles · Actuarial Mathematics for Modelling · Death strain at risk, expected and actual death strain, mortality profit

For a one-year term policy with sum assured S payable at the end of year of death, year-end reserve V1, and mortality rate q on the reserving basis, which expression gives the expected death strain per policy in force at the start of the year?

The expected death strain per policy is q times (S minus V1). On death the insurer pays S but releases the reserve V1 it would otherwise hold, so the strain is S minus V1, and this occurs with probability q.

  1. Aq(S - V1)Correct
  2. Bq S
  3. C(1 - q)(S - V1)
  4. Dq(S + V1)
  5. q V1

Explanation

Death strain on a death is S - V1 (claim less released reserve). Multiplying by the probability of death q gives q(S - V1). Using (1-q) confuses survival with death.

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