Mortality Assumptions and Longevity Risk
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Mortality Assumptions and Longevity Risk

Implications for pension funds and annuity providers

Pension funds and annuity providers need to effectively manage the longevity risk they are exposed to. Individuals receiving a lifetime income may live longer than expected or accounted for in the actuarial calculations to provision for these liabilities. Mismanaged longevity risk can deteriorate finances, cause bankruptcy and expose individuals to the risk of losing their retirement income. To safeguard against this risk, pension funds and annuity providers must provision for future improvements in mortality and life expectancy. The regulatory framework can support the effective management of longevity risk.

This publication assesses how pension funds, annuity providers such as life insurance companies, and the regulatory framework account for future improvements in mortality and life expectancy. The study then examines the mortality tables commonly used by pension funds and annuity providers against several well-known mortality projection models with the purpose of assessing the potential shortfall in provisions. The final part of the publication identifies best practices and discusses the management of longevity risk, putting forward a set of policy options to encourage and facilitate the management of longevity risk.

 

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    http://oecd.metastore.ingenta.com/content/2114021e.pdf
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Measuring and modelling mortality and life expectancy: Methods and limitations You do not have access to this content

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Author(s):
OECD

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This chapter presents the models used to project future improvement in mortality and life expectancy. The mortality projection models implemented are widely used and recognized, however each has its own advantages and weaknesses which must be considered when drawing conclusions from their results. The analysis here first covers the details of some of the mathematical concepts useful for understanding the measurement and modelling of mortality, and then goes into details regarding the models themselves. Finally the inputs used to calibrate the models are discussed, along with justification of the choices made and their limitations.

 
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