Fellow, Life Management Institute (FLMI)

Compare promised crediting with asset yield and other costs. Subtract the guarantee and expense load from yield first; remaining spread must still fund mortality, capital, and tax.

Apply it: At 5% yield less a 3% guarantee and 0.5% expense, the 1.5-point spread excludes claims and capital.

Include claims, capital, tax, and adverse yield changes. A falling asset yield can erase margin even when claims are unchanged, so stress both investment and liability assumptions.

Combine yield, guarantee, claims, and capital assumptions to see whether margin remains viable. A joint stress reveals whether lower yield, higher claims, or capital strain makes the product uneconomic.

Treat duration difference as a sensitivity signal. A longer liability duration means liabilities may rise more when rates fall; estimate both sides rather than reading the gap alone.

Apply it: Assets with 3-year duration against 8-year liabilities require rate-shock testing, not an assumed five-point loss.

Match payment timing with available cash-generating assets. Map expected claim dates to liquid asset maturities; accounting solvency does not pay a claim due before assets mature.

Compare asset and liability cash flows under parallel and non-parallel rate changes before adjusting the portfolio. Run parallel and curve-shift shocks, then identify which cash-flow mismatch drives the funding shortfall.

Identify the method and assumptions behind liability estimates. Compare reserve estimates only after aligning valuation date, method, discount basis, and policy assumptions.

Apply it: A $1m reserve records an obligation; a $100k payment due Friday is a separate liquidity need.

Forecast claim outflows and liquid assets independently. Project cash receipts and claim payments by date; a reserve balance is not a payment schedule.

A reserve estimate is not a segregated fund for immediate claim payment. The reserve measures estimated obligation, while treasury must separately source cash for the claim settlement date.

Normalize counts for exposure and portfolio mix. Normalize deaths by exposed lives and duration before interpreting experience as a change in mortality risk.

Apply it: Observed deaths of 120 versus 100 expected prompt mix and credibility checks before repricing.

Keep sales promises within approved materials and delegated powers. Agents may describe approved features but cannot promise unapproved guarantees or override delegated limits.

Escalate a persistent, credible deviation only after checking data quality, exposure, and portfolio composition. Check data completeness and portfolio mix before escalating a persistent deviation from expected experience.

Investigate experience before changing pricing assumptions. Separate random fluctuation from a sustained trend before changing mortality assumptions or premium rates.

Apply it: A $2m request against $1m retention requires treaty referral; the additional amount is not automatically accepted.

Identify the direct insurer’s retained share. Retention is the amount kept by the direct writer after applying contractual cession rules and limits.

Check treaty capacity and counterparty terms. Ceded risk remains subject to exclusions, capacity, and reinsurer performance; transfer is not automatic protection.

Keep agent and staff actions within assigned authority. Set role-based authority for exceptions so a valid control is not bypassed under sales pressure.

Apply it: An agent promises an unapproved feature; verify authority and correct customer communications before continuing sales.

Balance financial results with service and control measures. Review profit with persistency, complaints, and processing accuracy; financial growth can conceal deteriorating service.

Document assumptions and actions under adverse scenarios. Predefine liquidity actions and escalation triggers for adverse scenarios rather than improvising after strain appears.