Age-Specific Adjustment of Graduated Mortality

Yahia Salhi () and Pierre-Emmanuel Thérond
Additional contact information
Yahia Salhi: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon

Post-Print from HAL

Abstract: Recently, there has been an increasing interest from life insurers to assess their portfolios' mortality risks. The new European prudential regulation, namely Solvency II, emphasized the need to use mortality and life tables that best capture and reflect the experienced mortality, and thus policyholders' actual risk profiles, in order to adequately quantify the underlying risk. Therefore, building a mortality table based on the experience of the portfolio is highly recommended and, for this purpose, various approaches have been introduced into actuarial literature. Although such approaches succeed in capturing the main features, it remains difficult to assess the mortality when the underlying portfolio lacks sufficient exposure. In this paper, we propose graduating the mortality curve using an adaptive procedure based on the local likelihood. The latter has the ability to model the mortality patterns even in presence of complex structures and avoids relying on expert opinions. However, such a technique fails to offer a consistent yet regular structure for portfolios with limited deaths. Although the technique borrows the information from the adjacent ages, it is sometimes not sufficient to produce a robust life table. In the presence of such a bias, we propose adjusting the corresponding curve, at the age level, based on a credibility approach. This consists in reviewing the assumption of the mortality curve as new observations arrive. We derive the updating procedure and investigate its benefits of using the latter instead of a sole graduation based on real datasets. Moreover, we look at the divergences in the mortality forecasts generated by the classic credibility approaches including Hardy–Panjer, the Poisson–Gamma model and the Makeham framework on portfolios originating from various French insurance companies.

Keywords: Mortality; Credibility; Life Insurance; Graduation; Smoothing; Local Likelihood; Prediction (search for similar items in EconPapers)
Date: 2018-05
New Economics Papers: this item is included in nep-age, nep-ias and nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-01391285v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in ASTIN Bulletin, 2018, 48 (2), pp.543-569

Downloads: (external link)
https://hal.science/hal-01391285v1/document (application/pdf)

Related works:
Journal Article: AGE-SPECIFIC ADJUSTMENT OF GRADUATED MORTALITY (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01391285

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().