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Stephen Richards

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Lost in translation

Actuaries have a long-standing habit of using different terminology to statisticians. This page lists some common terms used by actuaries in mortality work and their "translation" for a non-actuarial audience. The terms and notation are those used by actuaries in the UK, but in every country I have visited the local actuaries have used similar notation.

Table 1. Common actuarial terms and their definition for statisticians.

Tags: central exposed-to-risk, curve of deaths, force of mortality, initial exposed-to-risk, mortality law, mortality rate, survival rates, waiting time, survival models

Simulation and survival

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.
Tags: survival curve, ICA, Solvency II, integrated hazard function

Run-off volatility

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.
Tags: simulation, curve of deaths, coefficient of variation, ICA, Solvency II

East meets West

This month sees the twentieth anniversary of the fall of the Berlin Wall.  This is therefore an appropriate time to remind ourselves of a dramatic example of the plasticity of mortality. 
Tags: mortality plasticity, Germany

Island life

We have written extensively about the use of postcodes and geodemographics for mortality modelling.  Two peer-reviewed papers recently presented to the Institute of Actuaries in London have testified to the power of geodemographics when applied to pensioner mortality: Richards (2008) and Madrigal et al (2009).
Tags: postcodes, geodemographics, Mosaic, Acorn, Guernsey, Jersey, Isle of Man

Cause and effect

Examining past trends in cause of death can be very instructive.  However, in some quarters it has become popular to try to extrapolate trends in causes of death to create a forecast of future mortality rates.
Tags: cause of death, heart disease, stroke, lung cancer, colorectal cancer, prostate cancer

Fifteen-year (h)itch

Effective risk modelling is about grouping people with shared characteristics which affect this risk.  In mortality analysis by far the most important risk factor is age, so it is not a good idea to mix the young and old if it can be avoided.  By way of illustration, Figure 1 shows that mortality rates increase exponentially over much of the post-retirement age range. 

Tags: survival analysis, survival curve, curve of deaths

Top of the table

In an earlier post we also showed how the U.K. was top of the obesity league amongst major EU nations.   Happily, the U.K. is top of a more constructive EU league table, namely the (lack of) affordability of cigarettes.
Tags: smoking

Part of the story

The Institute of Actuaries' sessional meeting on 28th September 2009 discussed an interesting paper.  It covered similar material to that in Richards (2008), but used different methods and different data.

Back(test) to the future

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.  By the time the Solvency II regime comes into force, I expect most major insurers across the EU will be using stochastic models for mortality projections (if they are not already doing so).

Tags: mortality projections, ICA, Solvency II, Lee-Carter, CMIR17, back-test