Information Matrix

In an earlier post we discussed how a survival model was directly equivalent to assuming future lifetime was a random variable.  One consequence of this is that survival models make it quick and simple to simulate a policyholder's future lifetime for the purposes of ICAs and Solvency II.

When investigating risk in an annuity portfolio, a key task is to simulate the future lifetime for each annuitant.  Survival models make this particularly easy, as covered in an earlier posting on simulating lifetimes.

Stochastic projections of future mortality are increasingly used not just to set future best-estimates, but also to inform on stress tests such as for ICAs in the UK.

 Every good statistician knows that correlation does not imply causation.  Just because two things appear linked does not mean they are. However, with historical data we often don't have the luxury of carrying out controlled, scientific experiments to see if A really does cause B.