Insurance-Company Risk Connected with Life-Insurance Contracts by Christophe Berthelot, Mireille Bossy and Nathalie Pistre Life-insurance contracts in francs are in fact capitalisation contracts which provide a return with the dual advantage of offering a guaranteed rate and benefiting from favourable asset performance. These contracts engender an interest-rate risk, which is all the more appreciable in that policyholders can always choose to withdraw from the contract (surrender), which is generally perceived as a free option that is difficult for insurers to manage. In this paper we describe the risk associated with such a contract for the insurance company in conjunction with the contract characteristics and financial variables. Weshow that this type of contract gives rise to options which are closer to real options than to traded financial options. We also quantify numerically the risk exposure on the value of capital in a stochastic market environment. We indicate the probability distribution for return on capital and specifically develop an analysis of risk sensitivity in terms of characteristic contract Key-words : real options, life insurance, risk, simulation. JEL Classification : G2, D2, D8.