Discussion of the Preliminary Report of the Committee on Valuation and Related Problems

This discussion concisely defines C-1, C-2 and C-3 risks and then demonstrates the hazards particular to mismatch (C-3) risk and presents the basic principles of immunization theory that can be used to manage this risk. The concept of a balance sheet that makes explicit contingency reserve provisions for C-1, C-2, and C-3 risks is introduced. The practical application of this theoretical risk analysis framework and its relationship to the approaches being taken by similar groups in the ACLI and in Canada are also discussed.