How to Manage Risk in Life Insurance

Abstract

In life insurance, insurer promises to pay a designated beneficiary a sum of money (the “benefits”) upon the death of the insured person.
Naturally, managing risk especially valuation is one of the most important tasks for insurer. In this research, we try to response the most important
of questions of insurers. How a contract must at least be priced such that the insurance company is treated fairly? In this research we use expectation
principle but the expectation is taken due to an equivalent martingale measure. Based on this assumption we proposed a model for valuation and
implemented the model for an example.