Assessment of longevity risk: credibility approach

Date

2021-05-01

Author

Kestel, Ayşe Sevtap
Yıldırım Külekci, Bükre

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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.

Subject Keywords

Longevity risk, Lee–Carter mortality model, Bühlmann credibility

URI

https://doi.org/10.1080/02664763.2021.1922613
https://hdl.handle.net/11511/90520

Journal

Journal Of Applied Statistics

DOI

https://doi.org/10.1080/02664763.2021.1922613

Collections

Graduate School of Applied Mathematics, Article

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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: https://doi.org/10.1080/02664763.2021.1922613.