Distribution of Surplus in Life Insurance

This paper discusses distribution of surplus in life insurance within a general Markov chain framework. A conservative interest rate and a conservative set of transition intensities are used for reserving purposes whereas more realistic assumptions are used for the purpose of distributing surplus. The paper examines various actuarial aspects of distributing surplus through either cash bonuses, terminal bonuses or increased benefits. The results are Illustrated by some examples. Keywords Distribution of surplus; bonus; with profits annuity policy; with profits disability policy.