Interest rate models for pension and insurance regulation

Dirk Broeders, Frank de Jong, Peter Schotman

Research output: Book/ReportReportProfessional


Liabilities of pension funds and life insurers typically have very long times to maturity. The valuation of such liabilities introduces particular challenges as it relies on long term interest rates. As the market for long term interest rates is less liquid, financial institutions and the regulator must rely, to some extent, on subjective parameters in regulation. An Ultimate Forward Rate is one way of dealing with the dependence on long term interest rates. We discuss two views with respect to the role of subjective parameters in regulation. These different views relate to the interpretation of a pension contract: a social contract or a financial contract. Furthermore, we assess the implications of different UFR proposals on managing liability risk.
Original languageEnglish
Number of pages39
VolumeDesign Paper 56
Publication statusPublished - 31 May 2016

Publication series

SeriesNetspar Industry Paper Series

Cite this