Valuating Interest Sensitive Annuities and Life Insurances under the FinancialCloud Architecture

The necessity for people to understand the value of the life insurance policy they are holding is crucial. Statistical information of 2012 shows that life insurance has become an inseparable part of our daily life. In the United States, insurance premiums total approximately 8.2% of the GDP. For Taiwan, this value ranks first in the world at 18.2% of the GDP, with each person holding 2.2 policies on average. This paper presents a life insurance valuation framework based on the Financial Cloud architecture. By combining various sources of web services, including market information, contract and policy data, and interest rate algorithms, our pricing algorithm can deliver theoretical gains on investing in life insurances. Due to the flexible nature of Financial Cloud, our algorithm can freely choose among varieties of service to deliver results based on different user point of views, i.e., interest rate interpolation method and interest rate data source can be chosen from a pool of web services. Our system is capable of pricing annuity and non-annuity style, whole life, and interest sensitive life insurances. This makes the comparison between similar policies with the same term length possible.