Pension-related application of the cohort life table

Kód výsledku v IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216275%3A25410%2F16%3A39901886" target="_blank" >RIV/00216275:25410/16:39901886 - isvavai.cz</a>

Výsledek na webu

<a href="http://is.muni.cz/do/econ/sborniky/2016/EFS2016-Proceedings_final_September_19_final.pdf" target="_blank" >http://is.muni.cz/do/econ/sborniky/2016/EFS2016-Proceedings_final_September_19_final.pdf</a>

DOI - Digital Object Identifier

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Jazyk výsledku

angličtina

Název v původním jazyce

Pension-related application of the cohort life table

Popis výsledku v původním jazyce

Longevity risk, the risk that people will live longer than expected, weighs heavily on those who run pension schemes and on insurers that provide annuities. Hence the prediction of future mortality rates is an issue of fundamental importance for the insurance and pensions industry. Our analysis focuses on mortality at higher ages (65-95), given our interest in pension-related applications where the risk associated with longer-term cash flow is primarily linked to uncertainty in future rates of mortality. The Lee-Carter model became one of the most applied models and it is used to forecast age-specific death rates. The main goal of this paper is to apply the Lee-Carter model to construct the so-called "cohort life tables" for calculation of a 30-year annuity to a person aged 65 in 2015. We use data on deaths and exposures for the Czech Republic from the Human Mortality Database (HMD). The HMD provides evidence that life expectancy is increasing. We have shown that if the today rate of increase will continue, it will at age 65 concluded (after calculation) to increase the present value of pension liabilities in defined-benefit schemes about 5 % if we use cohort life table instead of period life table. Probability statements derived from the use of a single model and parameter set should be treated with caution. Hence, there is a need for awareness of model risk when assessing longevity-related liabilities.

Název v anglickém jazyce

Pension-related application of the cohort life table

Popis výsledku anglicky

Longevity risk, the risk that people will live longer than expected, weighs heavily on those who run pension schemes and on insurers that provide annuities. Hence the prediction of future mortality rates is an issue of fundamental importance for the insurance and pensions industry. Our analysis focuses on mortality at higher ages (65-95), given our interest in pension-related applications where the risk associated with longer-term cash flow is primarily linked to uncertainty in future rates of mortality. The Lee-Carter model became one of the most applied models and it is used to forecast age-specific death rates. The main goal of this paper is to apply the Lee-Carter model to construct the so-called "cohort life tables" for calculation of a 30-year annuity to a person aged 65 in 2015. We use data on deaths and exposures for the Czech Republic from the Human Mortality Database (HMD). The HMD provides evidence that life expectancy is increasing. We have shown that if the today rate of increase will continue, it will at age 65 concluded (after calculation) to increase the present value of pension liabilities in defined-benefit schemes about 5 % if we use cohort life table instead of period life table. Probability statements derived from the use of a single model and parameter set should be treated with caution. Hence, there is a need for awareness of model risk when assessing longevity-related liabilities.

Druh

D - Stať ve sborníku

CEP obor

BB - Aplikovaná statistika, operační výzkum

OECD FORD obor

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Projekt

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Návaznosti

S - Specificky vyzkum na vysokych skolach

Rok uplatnění

2016

Kód důvěrnosti údajů

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Název statě ve sborníku

European Financial Systems 2016 : proceedings of the 13th International Scientific Conference

ISBN

978-80-210-8308-0

ISSN

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e-ISSN

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Počet stran výsledku

8

Strana od-do

191-198

Název nakladatele

Masarykova univerzita

Místo vydání

Brno

Místo konání akce

Brno

Datum konání akce

27. 6. 2016

Typ akce podle státní příslušnosti

EUR - Evropská akce

Kód UT WoS článku

000385692200024