Assessment of longevity risk: credibility approach

Kestel, Ayşe Sevtap
Yıldırım Külekci, Bükre
To correctly measure the effect of mortality rates on the stability of insurance and pension provider's financial risk, longevity risk should be considered. This paper aims to investigate the future mortality and longevity risk with different age structures for different countries. Lee–Carter mortality model is used on the historical census data to forecast future mortality rates. Turkey, Germany, and Japan are chosen concerning their expected life and population distributions. Then, the longevity risk on a hypothetical portfolio is assessed based on static and dynamic mortality table approaches. To determine the impact of longevity risk, which is retrieved using a stochastic mortality model, a pension insurance product is taken into account. The net single premium for an annuity is quantified under the proposed set up for the selected countries. Additionally, the credibility approach is proposed to establish a reliable estimate for the annuity net single premium.
Journal Of Applied Statistics


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Yavrum, Cem; Selçuk Kestel, A. Sevtap.; Department of Actuarial Sciences (2019)
Annuity and its pricing are very critical to the insurance companies for their financial liabilities. Companies aim to adjust the prices of annuity by choosing the forecasting model that fits best to their historical data. While doing it, there may be outliers in the historical data influencing the model. These outliers can be arisen from environmental conditions and extraordinary events such as weak health system, outbreak of war, occurrence of a contagious disease. These conditions and events impact morta...
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In life insurance contracts, actuaries generally value premiums using deterministic mortality rates and interest rates. They have ignored them stochastically in most of the studies. However it is known that neither interest rates nor mortality rates are constant. It is also known that companies may encounter insolvency problems such as ruin, so the ruin probability need to be added to the valuation of the life insurance contracts process. Insurance companies should model their surplus processes to price som...
Hasgül, Etkin; Kestel, A. Sevtap; Yolcu Okur, Yeliz (2020-01-01)
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Assessment of Longevity Risk on PensionFunds: Credibility Approach
Yıldırım Külekci, Bükre (null; 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 inv...
Stochastic surplus processes with VaR AND CVaR simulations in actuarial applications
Şimşek, Meral; Uğur, Ömür; Kestel, Sevtap Ayşe; Department of Actuarial Sciences (2016)
The theory of ruin is a substantial study for those who are interested in financial survival probability based on the patterns imposed by the surplus process, which determines the insurer’s capital balance at a given time. In other words, fluctuations in aggregate claims as well as premiums in such processes can be secured by a certain capital. In this study, we simulate various surplus processes under different claim sizedistribution assumptions and extend the analyses by adding perturbation of a Brownian mo...
Citation Formats
A. S. Kestel and B. Yıldırım Külekci, “Assessment of longevity risk: credibility approach,” Journal Of Applied Statistics, pp. 1–20, 2021, Accessed: 00, 2021. [Online]. Available: