EOC Problem #8, part A… answer key says “(Hannibal Insurance Co.) has a relatively small surplus portfolio”. Last year, assets exceeded liabilities by $30mm; four years ago, by $60mm. What would be an adequate surplus level for a life insurance company - as a percentage of liabilities? The book doesn’t say. Thanks
This based on the fact how well your liabilities are immunized… if your core portfolio immunizes your liabilities with duration (int rate risk) and matching PV of liabilites with the portfolio (YC risk) then I believe you are fine even with a small surplus portfolio and invest that actively for long term wealth generation…