The calculation of life and health insurance liabilities is based on assumptions about mortality and disability rates, and insurance companies face systematic insurance risks if assumptions about these rates change. In this paper, we study how to manage systematic insurance risks in a multi-state setup by considering securities linked to the transition intensities of the model. We assume there exists a market for trading two securities linked to, for instance, mortality and disability rates, the de-risking option and the de-risking swap, and we describe the optimization problem to find the de-risking strategy that minimizes systematic insurance risks in a multi-state setup. We develop a numerical example based on the disability model, and the results imply that systematic insurance risks significantly decrease when implementing de-risking strategies.
