Possible risks for all contracts

For all the quesetions regarding discussing / describing a risk. you also need to discuss the tools to reduce that particular risk.
Common for all
  • New business volume risk: too high (exhaust capital) too low (not enough to cover the fixed expense)
  • Mix of business, if there is cross subsidy..
  • Investment risk
    • Market risk: Assets may not deliver required return.
    • Credit risk: the issuer of any assets may default
  • Cash flow mismatching risk
    no cash is received until the policyholder dies so liquidity is needed from elsewhere to pay the annuity.
  • Liquidity risk: Liquidity risk occurs when an individual investor, business, or financial institution cannot meet its short-term debt obligations. The investor or entity might be unable to convert an asset into cash without giving up capital and income due to a lack of buyers or an inefficient market.
  • External risk: Changes in regulation, changes in solvency requirements, tax changes
  • Operational risk: Operational risk is the prospect of loss resulting from inadequate or failed procedures , systems or policies. Employee errors. Systems failures. Fraud or other criminal activity. Any event that disrupts business processes.
For life insurance
The risk of underprice.
  • Mortality risk
  • Investment risk
  • Expense risk
For pension
The risk that the promised benefit can not be met, resulting from
  • Wrong actuarial assumption
  • Adverse market movements
For general insurance
  • Accumulations of risk (e.g. geographical or by class of business) and catastrophy
  • Poor persistency rate