Maximization of a hedged investment budget for an index-linked insurance product

A method for implementing an index-linked life insurance product having a term and an annual guarantee, comprising:

• allocating at least a portion of a premium payment associated with the index-linked life insurance product to a fixed income investment and projecting an annual fixed income yielded for the fixed income investment;
• determining a hedged investment budget based at least in part on the projected annual fixed income yield and an estimated cost of the annual guarantee over the term;
• allocating the hedged investment budget to a hedged investment linked to an index in order to generate proceeds for supporting an amount credited to the index-linked insurance product based on index-linked earnings;
• and
• upon the occurrence of a predetermined event, if the amount credited based on the index-linked earnings is not equal to at least the annual guarantee compounded over the term, using funds from one or more reserves or a risk fund to increase the amount credited to be substantially equal to the compounded annual guarantee.

A method for implementing an index-linked life insurance product, comprising:

• determining an investment budget by projecting a fixed income yield to be produced by investing a net premium payment in a fixed income investment;
• creating a segment of the index-linked life insurance product having a term, wherein the term is comprised of a plurality of term periods;
• determining a hedged investment budget based at least in part on deducting from the investment budget an estimated cost of an annual guarantee over the term associated with the index-linked life insurance product;
• allocating the hedged investment budget to a hedged investment designed to generate proceeds for supporting index-linked earnings to be credited to the index-linked life insurance product;
• determining an initial index value;
• at the end of each term period for the duration of the term,
• determining an index value for the ended term period,
• determining a current segment value by crediting to the segment an amount based on the index-linked earnings comprising a percentage difference between the index value for the ended term period and the initial index value, and
• realizing any proceeds generated by the hedged investment;
• and
• upon the occurrence of a predetermined event, if the amount credited to the segment based on the index-linked earnings does not equal to at least the annual guarantee compounded over the term, using funds from one or more reserves or a risk fund to increase the amount credited to the segment to be substantially equal to the compounded annual guarantee.

A system for implementing an index-linked insurance product having a term comprised of a plurality of term periods, an annual guarantee and a hedged investment budget comprising:

• an input device for inputting data to identify the term, the annual guarantee, and an estimated cost of the annual guarantee over the term;
• and
• a processor functionally coupled to the input device for receiving the data and thereafter executing computer-executable instructions for:
• monitoring index-linked earnings to be credited to the index-linked insurance product based on performance rate of an index,
• crediting an amount to the index-linked insurance product based on the index-linked earnings, the index-linked earnings being supported by proceeds generated by a hedged investment made using the hedged investment budget, wherein the hedged investment budget is determined based at least in part on allocating at least a portion of a premium payment to a fixed income investment and projecting an annual fixed income yield of the fixed income investment, and deducting from the projected annual fixed income yield an estimated cost of the annual guarantee;
• determining a guaranteed value of the index-linked insurance product based on the annual guarantee;
• and
• upon the occurrence of a predetermined event, if the amount credited based on the index-linked earnings does not equal to at least the guaranteed value, using funds from one or more reserves or a risk fund to increase the amount credited to be substantially equal to the guaranteed value.