Fair dynamic valuation of insurance liabilities: Merging actuarial judgement with market- and time-consistency

© 2019 Elsevier B.V. In this paper, we investigate the fair valuation of insurance liabilities in a dynamic multi-period setting. We define a fair dynamic valuation as a valuation which is actuarial (mark-to-model for claims independent of financial market evolutions), market-consistent (mark-to-market for any hedgeable part of a claim)and time-consistent, extending the work of Dhaene et al. (2017)and Barigou and Dhaene (2019). We provide a complete hedging characterization for fair dynamic valuations. Moreover, we show how to implement fair dynamic valuations through a backward iterations scheme combining risk minimization methods from mathematical finance with standard actuarial techniques based on risk measures.