Assessment of Longevity Risk on PensionFunds: Credibility Approach

2019-10-28
Over the last 100 years, there has been a steady decline in mortality rates. With the unexpected decrease in death rates; variability in the age of death declined and deaths are concentrated to the older years of life, therefore, causing deficits in the pooled funds of insurance and pension providers, which are built upon the underestimated rates. To correctly measure the effect of mortality rates on the financial stability of these providers, longevity risk should be taken seriously. This study aims to investigate the future mortality and longevity risk of three countries with different age structures. Turkey, Germany, and Japan are chosen with respect to their expected life and population distributions. Lee-Carter mortality model is used on the historical census data to forecast future mortality rates. The longevity risk on a hypothetical portfolio is assessed based on static and dynamic mortality table approaches. To determine the impact of longevity risk retrieved from the use of a stochastic mortality model and a pension product, annuity, is taken into account. The net single premium, variance and the risk measures for the annuity are quantified under the proposed set up for the selected countries. Additionally, a credibility approach is proposed to establish a reliable estimate for the annuity net single premium between the static and dynamic

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Citation Formats
B. Yıldırım Külekci, “Assessment of Longevity Risk on PensionFunds: Credibility Approach,” 2019, Accessed: 00, 2021. [Online]. Available: http://istkon2019.giresun.edu.tr/Files/ckFiles/istkon2019-giresun-edu-tr/AbstractBook10112019.pdf.