Risk adjusted pricing: The case for MCVNB

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September 2015


These are challenging times for US insurers. In addition to significant local and global regulatory developments that may have a profound impact on their business, management needs to accommodate a new generation of customer expectations and purchasing behavior. We believe that MCVNB, a value measurement tool that is available now and not contingent on finalized capital standards, can help insurers gain the insights they need to select the best options for product design and pricing. This tool makes better use of insights from insurers’ own risk quantification than other pricing tools and directly applies these insights to calculations of value to shareholders and policyholders.

MCVNB stands for “market consistent value of new business” and calculates how much value sales are generating for the business’ owners. The market consistent embedded value (MCEV) principles that the European Insurance CFO Forum developed provide a comprehensive and stable foundation for this calculation.

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Jorge Noronha

Director, Life Actuarial Services, PwC US

Richard Isherwood

Manager, Life Actuarial Services, PwC US

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