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Model risk

Investors in longevity risk are particularly interested in extremes — they want to know the maximum loss they are likely to bear for a given probability.  Reinsurers can be even more strongly interested in extremes, especially if they have written stop-loss reinsurance. 
Written by: Stephen RichardsTags: model risk, mortality improvements, mortality projections, Solvency II

Applying the brakes

The CMI has released a second version of its deterministic targeting model for mortality improvements.  This type of model is called an expectation, as the user must enter their belief for the long-term rate of mortality improvement to use the tool.  Expectations have their own unique features, as discussed

Written by: Stephen RichardsTags: CMI, mortality improvements, mortality projections

Keeping it simple — postscript

Last week we looked at how to compare mortality-improvement bases for pensions and annuities.  However, for many years some pension schemes in the UK did not have explicit mortality-improvement projections.  Instead, they allowed for mortality improvements by making a deduction from the valuation discount rate.
Written by: Stephen RichardsTags: mortality improvements, mortality projections, equivalent annuity

Keeping it simple

Which mortality-improvement basis is tougher — a medium-cohort projection with a 2% minimum value, or a long-cohort projection with a 1% minimum?

Written by: Stephen RichardsTags: mortality improvements, mortality projections, equivalent annuity

The accumulation of small changes

It is often easy to be fooled into thinking that a small change is of little importance.  Small changes can persist over time, and sometimes it is only in retrospect that one realises just how big the accumulated change is.
Written by: Stephen RichardsTags: mortality improvements, centenarians

Over-dispersion

Actuaries need to project mortality rates into the far future for calculating present values of pension and annuity liabilities. In an earlier post Stephen wrote about the advantages of stochastic projection methods. One method we might try is the two-dimensional P-spline method with the simple assumption that the number of deaths at age i in year j follows a Poisson distribution (Brouhns, et al, 2002). Figure 1 shows observed and fitted log mortalities for the cross-section of the

Written by: Iain CurrieTags: over-dispersion, mortality projections, mortality improvements

Accelerating improvements in mortality

In February 2009 a variation on the Lee-Carter model for smoothing and projecting mortality rates was presented to the Faculty of Actuaries.  A key question for any projection model is whether the process being modelled is stable.  If the process is not stable, then a model assuming it is stable will give misleading projections.  Equally, a model which makes projections by placing a greater emphasis on recent data will be better able to identify a change in tempo of the underlying p

Written by: Stephen RichardsTags: mortality improvements, force of mortality

Public-health targets for mortality improvements

Public-health officials typically allocate their resources using evidence-based methods. They know their annual budget for spending on health measures, and they typically want to save as many lives as they can with that fixed budget.
Written by: Stephen RichardsTags: mortality improvements, years of life lost