Social Insurance Pension Schemes: Stochastic Actuarial Valuation Using an Analytical Model

Iyer Subramaniam ()
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Iyer Subramaniam: Hon. FIA, 3, rue Giovanni Gambini, Geneva 1206, Switzerland

Asia-Pacific Journal of Risk and Insurance, 2015, vol. 9, issue 2, 261-301

Abstract: Actuarial valuations of social insurance pension schemes continue to be carried out almost exclusively on traditional, deterministic lines, despite certain advantages of stochastic valuations. The few instances, that there are of such valuations, have been based on the simulation methodology, which is computer-intensive and requires extensive data. It is believed that the analytical approach may provide a simpler alternative and therefore encourage the spread of stochastic valuations. This paper refines the theoretical basis of an existing analytical valuation model, and generalizes the projection formulae to accommodate several inter-correlated stochastic factors. A stochastic valuation of an on-going retirement pension scheme is illustrated. It is hoped that the paper will stimulate further theoretical and practical research, and eventually lead to the spread of stochastic valuations in social security.

Keywords: social insurance; pensions; defined-benefit; deterministic valuations; stochastic valuations; demographic projections; financial projections; financial systems; lognormal sum distribution; lognormal difference distribution (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/apjri-2014-0030

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