A Credibility Approach of the Makeham Mortality Law

Yahia Salhi (), Pierre-Emmanuel Thérond and Julien Tomas ()
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Yahia Salhi: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon
Julien Tomas: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon

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Abstract: The present article illustrates a credibility approach to mortality. Interest from life insurers to assess their portfolios' mortality risk has considerably increased. The new regulation and norms, Solvency II, shed light on the need of life tables that best reect the experience of insured portfolios in order to quantify reliably the underlying mortality risk. In this context and following the work of Bühlmann and Gisler (2005) and Hardy and Panjer (1998), we propose a credibility approach which consists on reviewing, as new observations arrive, the assumption on the mortality curve. Unlike the methodology considered in Hardy and Panjer (1998) that consists on updating the aggregate deaths we have chosen to add an age structure on these deaths. Formally, we use a Makeham graduation model. Such an adjustment allows to add a structure in the mortality pattern which is useful when portfolios are of limited size so as to ensure a good representation over the entire age bands considered. We investigate the divergences in the mortality forecasts generated by the classical credibility approaches of mortality including Hardy and Panjer (1998) and the Poisson-Gamma model on portfolios originating from various French insurance companies.

Keywords: Graduation; Life insurance; Mortality; Credibility; Makeham law; Extrapolation (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-for, nep-ias and nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-01232683v1
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Published in European Actuarial Journal, 2016, 6 (1), pp.61-96. ⟨10.1007/s13385-016-0125-z⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01232683

DOI: 10.1007/s13385-016-0125-z

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