Net premium valuation

[Insurance, Banking, Mortgage, Loan]

A Net Premium Valuation is definitely an actuarial determination, applied to establish a value for the liabilities of a life insurer.

It entails establishing a present worth for the contractual liabilities of a contract, and deducting the value of future premiums. The contractual liabilities, as well as the future premiums within this calculation, enable only for mortality and interest. The important factor having a new premium valuation is the fact that the premiums getting valued are theoretical measures – they make no reference to the actual premiums getting charged by the insurer.

This strategy is a effectively established actuarial valuation approach, that became popular due to its simplicity, consistency, and ease of determination.

New methods

Due to the advent of computer systems, the much more complex so-called Gross Premium Valuation calculation (which can be also much more realistic than the Net Premium Valuation) has grow to substantially far more feasible, and is displacing the archaic Net Premium Valuation further from its historical position of prominence.

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