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Feb 2025

How to answer this Technical interview question about Market and Credit Risk for Senior-Level Actuarial and Valuation Analyst?

How do you incorporate market and credit risk into actuarial valuations for a life insurance portfolio?

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Actuarial and Valuation Analyst

Technical

Asked at

Prudential

Difficulty :

Hard

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Explanation

This question evaluates your ability to account for external risks like market volatility and credit risk in life insurance portfolio valuations. Recruiters are looking for candidates who can integrate financial and actuarial principles, such as scenario testing and risk-adjusted discount rates. A strong answer will include specific methods and examples of mitigating these risks. Avoid neglecting the impact of macroeconomic factors.

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Answer Example

I incorporate market and credit risk by adjusting discount rates based on the creditworthiness of assets backing the portfolio and using scenario testing to model the impact of market fluctuations. For example, while valuing a life insurance portfolio during a period of interest rate volatility, I applied a risk-adjusted discount rate and conducted sensitivity analyses under various economic scenarios. This ensured that the valuation reflected both current market conditions and potential future risks.

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