Age-Specific Adjustment of Graduated Mortality

Abstract : Recently, there has been an increasing interest of life insurers to assess their portfolios own mortality risk. 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' proper risk profile, in order to adequately quantify the underlying risk. Therefore, building a mortality table based on the experience from the portfolio is highly recommended and, for this purpose, various approaches have been introduced in the literature. Although, such approaches succeed in capturing the main feature, it remains difficult to assess the mortality when the underlying portfolio lacks of sufficient exposure. In this paper, we propose to graduate the mortality curve using an adaptive procedure based on the local likelihood, which has the ability to model the mortality patterns even in presence of complex structures and avoid to rely on experts opinion. However, such a technique fails at proposing a consistent yet regular structure when 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 tables. In presence of such a bias, we propose to adjust the corresponding curve, at the age level, based on a credibility approach. This consists on reviewing, as new observations arrive, the assumption on the mortality curve. We derive the updating procedure and investigate the 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 classical credibility approaches including Hardy-Panjer, the Poisson-Gamma model and Makeham framework on portfolios originating from various French insurance companies.
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Soumis le : jeudi 3 novembre 2016 - 10:44:24
Dernière modification le : vendredi 11 novembre 2016 - 11:00:04
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  • HAL Id : hal-01391285, version 1

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Yahia Salhi, Pierre-Emmanuel Thérond. Age-Specific Adjustment of Graduated Mortality. 2016. 〈hal-01391285〉

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