On life insurance reserves in a stochastic mortality and interest rates environment

The calculation of the reserves in a stochastic mortality and interest rates environment for a general portfolio of life insurance policies is examined. The first two moments of the prospective loss random variable for the general portfolio are derived. A Monte Carlo simulation method is used to estimate the distribution of this random variable. Another approximation of the prospective loss random variable which is based on the assumption of a large portfolio is also considered. In the numerical examples, a discrete-time model for the stochastic interest rates is assumed.