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Hedging or betting?

Last week I presented at Longevity 14 in Amsterdam. A recurring topic at this conference series is index-based approaches to managing longevity risk. Indeed, this topic crops up so reliably, one could call it a hardy perennial.

Written by: Stephen RichardsTags: basis risk, concentration risk, model risk

Socio-economic differentials: convergence and divergence

Many western countries, including the UK, have recently experienced a slowdown in mortality improvements.  This might lead to the conclusion that the age of increasing life expectancies is over.  But is that the case for everyone? 
Written by: Torsten KleinowTags: mortality convergence, mortality improvements, concentration risk, basis risk

How much data do you need?

There are two common scenarios when an actuary has to come up with a mortality basis for pensioners or annuitants.
Written by: Stephen RichardsTags: credibility, basis risk, concentration risk

Reverse Gear

Against a background of long-term mortality improvements it is understandable to expect that societal change and developments in health care will be agents of progress. Recent research from Princeton Professor of Economics Anne Case and Nobel prize-winning economist Angus Deaton jolts such complacency in the starkest way.
Written by: Gavin RitchieTags: longevity, mortality improvements, mortality plasticity, basis risk

Haircut or hedge-trim?

Richard Willet's observation last year on the restatement of population estimates was picked up again recently by the BBC. Amongst the implications of the missing nonagenarians are some potentially interesting consequences for index-based longevity hedges.
Written by: Stephen RichardsTags: ONS, longevity hedge, basis risk, S-forward

Risk and models under Solvency II

Insurers need to have internal models for their major risks. Indeed, both the Individual Capital Assessment (ICA) regime in the UK and the pending Solvency II rules in the EU demand that insurers have good models for their risks.
Written by: Stephen RichardsTags: ICA, Solvency II, model risk, basis risk, concentration risk, model points

Everything counts in large amounts

Models for projecting mortality are typically built using information on lives with deaths by age and gender. However, this ignores an important risk factor for longevity, namely socio-economic group. For annuity and pension reserving, therefore, it would be helpful to use such information when building stochastic projection models.

Written by: Iain CurrieTags: basis risk, piggyback model, amounts-weighted mortality

A basis point

In an earlier post I mentioned the advent of survivor forwards, or S-forwards, a derivative contract which could be used for hedging pension liabilities.
Written by: Stephen RichardsTags: survivor forward, S-forward, hedging, basis risk

Forecasting with limited portfolio data

In a recent post on basis risk in mortality projections, I floated the idea of forecasting with limited data and even suggested that it would be possible to use the method to produce a family of consistent forecasts for different classes of business. The present post describes an example of how this idea works in practice.
Written by: Iain CurrieTags: basis risk, mortality projections

Self-selection

Actuaries valuing pension liabilities need to make projections of future mortality rates.  The future is inherently uncertain, so it is best to use stochastic models of mortality.  Unfortunately, such models require a long enough time series, but few (if any) portfolios have such data.  In the UK actuaries typically rely on one of two alternative data sets: the England & Wales data from the ONS, which goes back to 1961, or the "assured lives" data from the CMI, wh

Written by: Stephen RichardsTags: basis risk, CMI