1. Risk Assessment:

a. Risk Identification:

• Hazard Analysis: Assessing potential risks associated with new insurance products by identifying various hazards (e.g., mortality, morbidity, lapse rates, etc.).
• Data Collection: Gathering relevant historical data, considering factors like demographics, health statistics, and market trends.

b. Risk Quantification:

• Probability Estimation: Utilizing statistical models to estimate the likelihood of occurrence of different risks based on historical data and actuarial assumptions.
• Severity Assessment: Evaluating the potential financial impact of identified risks on the insurance company.

c. Scenario Analysis:

• Stress Testing: Conduct scenario-based stress tests to simulate extreme events or adverse scenarios to understand their impact on the insurance product's viability.
• Sensitivity Analysis: Assessing how changes in key variables (e.g., interest rates, mortality rates) affect the risk exposure of the product.

2. Pricing Strategies:

a. Premium Rate Determination:

• Risk Loading: Calculating the risk-adjusted premium rates by incorporating estimated risks into pricing formulas.
• Mortality/Morbidity Table Development: Developing mortality and morbidity tables specific to the product to estimate future claims.

b. Pricing Structures:

• Experience Analysis: Analyzing historical data to understand policyholder behavior and mortality/morbidity patterns, is essential for determining pricing structures.
• Actuarial Models: Using actuarial models (e.g., life contingencies, survival models) to project future cashflows, claim amounts, and policyholder behavior.

c. Market and Regulatory Considerations:

• Competitive Analysis: Evaluating competitors' products and pricing strategies to ensure competitiveness.
• Regulatory Compliance: Ensuring that the pricing aligns with regulatory requirements and standards (e.g., minimum capital requirements, and solvency ratios).

3. Technical Aspects:

a. Mathematical Models:

• Rate Making Models: Employing mathematical models (e.g., credibility theory, loss ratio method) to determine appropriate premium rates.
• Simulation and Stochastic Models: Utilizing simulation techniques and stochastic modeling for pricing uncertainty and risk assessment.

b. Actuarial Assumptions:

• Assumption Setting: Defining and justifying key assumptions related to mortality, morbidity, lapse rates, and investment returns used in pricing models.
• Sensitivity Testing: Testing the impact of variations in assumptions on pricing outcomes.

4. Financial Models:

• Cashflow Projection: Building comprehensive models that predict future inflows and outflows based on premiums, claims, and investments.
• Profitability Assessment: Evaluating the expected profitability of insurance products by forecasting revenues and expenses over time.
• Liability Projections: Estimating future liabilities, including reserves needed to cover policyholder obligations, considering factors like policy durations, mortality rates, and policyholder behavior.