Modelling Longevity Dynamics for Pensions and Annuity Business
OUP Oxford, Jan 29, 2009 - Business & Economics - 416 pages
Mortality improvements, uncertainty in future mortality trends and the relevant impact on life annuities and pension plans constitute important topics in the field of actuarial mathematics and life insurance techniques. In particular, actuarial calculations concerning pensions, life annuities and other living benefits (provided, for example, by long-term care insurance products and whole life sickness covers) are based on survival probabilities which necessarily extend over a long time horizon. In order to avoid underestimation of the related liabilities, the insurance company (or the pension plan) must adopt an appropriate forecast of future mortality. Great attention is currently being devoted to the management of life annuity portfolios, both from a theoretical and a practical point of view, because of the growing importance of annuity benefits paid by private pension schemes. In particular, the progressive shift from defined benefit to defined contribution pension schemes has increased the interest in life annuities with a guaranteed annual amount. This book provides a comprehensive and detailed description of methods for projecting mortality, and an extensive introduction to some important issues concerning longevity risk in the area of life annuities and pension benefits. It relies on research work carried out by the authors, as well as on a wide teaching experience and in CPD (Continuing Professional Development) initiatives. The following topics are dealt with: life annuities in the framework of post-retirement income strategies; the basic mortality model; recent mortality trends that have been experienced; general features of projection models; discussion of stochastic projection models, with numerical illustrations; measuring and managing longevity risk.
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adopted adverse selection age-pattern of mortality age-specific annual amount annuity portfolio annuity provider approach assume basis Belgian Cairns–Blake–Dowd calculated calendar chapter cohort effects death benefit death rates defined denote Denuit equivalence principle estimated example expected value extrapolation Figure force of mortality formula fund future mortality future payments given Gompertz law guaranteed hedging hence immediate life annuity individual interest rate interval Lee–Carter model lifetime linear logit transform longevity bonds longevity risk males method mortality assumption mortality forecasts mortality improvements mortality model mortality projections mortality rates mortality risk mortality trends number of deaths observed obtained parameters particular pension Poisson population prediction intervals premium present value probabilities of death probability distribution projected mortality qx(t random fluctuations refer reinsurance Renshaw and Haberman residuals Section singular value decomposition smoothing spline statistical Statistics Belgium stochastic survival function value of future variable µx(t