Swiss coherent mortality model as a basis for developing longevity de-risking solutions for Swiss pension funds: A practical approach

Wan, Che'ng; Bertschi, Ljudmila

doi:10.1016/j.insmatheco.2015.03.025

Cited by 19 publications

(17 citation statements)

References 17 publications

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“…They assume that the reference population follows a deterministic long-run trend which is shared with the small population, and then model short term deviations of the small population from that trend using a multivariate stationary time series. Similarly, Wan and Bertschi (2015) model the larger population using the multi-factor single population model proposed by Plat (2009a) and then model the spread between the larger population and the smaller population with a three factor Lee-Carter model. In a related study, Plat (2009b) introduces a model for forecasting portfolio specific mortality alongside the relevant national population.…”

Section: Wan and Bertschi (2015)mentioning

confidence: 99%

“…In this model, portfolio specific mortality forecasts are obtained by combining national mortality projections derived from a standard single-population CBD model, with forecasts of the ratio between portfolio mortality rates and national population mortality rates. It is worth noting that Jarner and Kryger (2011), Wan and Bertschi (2015) and Plat (2009b) adopt the same approach for modelling the factors driving the dynamics of the mortality ratios and use a vector autoregressive model of order 1, VAR(1), so to avoid any long-term divergence of the mortality in the two populations.…”

Section: Wan and Bertschi (2015)mentioning

confidence: 99%

“…As for the book population, we follow the assumption commonly made in the literature (Li and Lee, 2005;Plat, 2009b;Cairns et al, 2011a;Jarner and Kryger, 2011;Li and Hardy, 2011;Hyndman et al, 2013;Wan and Bertschi, 2015). More precisely we assume that in the long-run the two populations experience similar mortality improvements and therefore model the spread in the time indexes and cohort effects as stationary processes:…”

Section: Time Series Dynamicsmentioning

confidence: 99%

“…In particular, the Multipopulation GLM of Hatzopoulos and Haberman (2013) is considered to be impractical for basis risk assessment as it is a complex model which is computationally involved to implement and may be difficult to communicate to non-experts. In addition, we disregard the Plat+Lee-Carter model of Wan and Bertschi (2015) (apart from other reasons discussed later) because it combines a parametric structure for the reference with a non-parametric structure for the book, and we believe that for the sake of interpretability of the parameters both parts of the model should be within the same class of models. Finally, although the Bayesian two-population APC model of Cairns et al (2011a) is particularly amenable to the short history and modest exposures sizes of most book datasets, the implementation and transparency issues related to the underlying Bayesian approach have led us to rule out this model.…”

Section: Ease Of Implementation and Transparencymentioning

confidence: 99%

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A Comparative Study of Two-Population Models for the Assessment of Basis Risk in Longevity Hedges

Villegas¹,

Haberman²,

Kaishev³

et al. 2017

ASTIN Bull.

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link ABSTRACTLongevity swaps have been one of the major success stories of pension scheme derisking in recent years. However, with some few exceptions, all of the transactions to date have been bespoke longevity swaps based upon the mortality experience of a portfolio of named lives. In order for this market to start to meet its true potential, solutions will ultimately be needed that provide protection for all types of members, are cost effective for large and smaller schemes, are tradable, and enable access to the wider capital markets. Index-based solutions have the potential to meet this need; however concerns remain with these solutions. In particular, the basis risk emerging from the potential mismatch between the underlying forces of mortality for the index reference portfolio and the pension fund/annuity book being hedged is the principal issue that has, to date, prevented many schemes progressing their consideration of index-based solutions. Two-population stochastic mortality models offer an alternative to overcome this obstacle as they allow market participants to compare and project the mortality experience for the reference and target populations and thus assess the amount of demographic basis risk involved in an index-based longevity hedge. In this paper, we systematically assess the suitability of several multi-population stochastic mortality models for assessing basis risks and provide guidelines on how to use these models in practical situations paying particular attention to the data requirements for the appropriate calibration and forecasting of such models.

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Section: Wan and Bertschi (2015)mentioning

confidence: 99%

Section: Wan and Bertschi (2015)mentioning

confidence: 99%

Section: Time Series Dynamicsmentioning

confidence: 99%

Section: Ease Of Implementation and Transparencymentioning

confidence: 99%

See 2 more Smart Citations

A Comparative Study of Two-Population Models for the Assessment of Basis Risk in Longevity Hedges

Villegas¹,

Haberman²,

Kaishev³

et al. 2017

ASTIN Bull.

View full text Add to dashboard Cite

show abstract

“…Substantial work has been produced to price longevity risk and to propose financial tools such as bonds and swaps to transfer the risk to specific stakeholders or even capital markets (Barrieu et al 2012, Bauer et al 2010, Barbarin 2008, Blake et al 2006, Hunt and Blake 2015, Kogure and Kurachi 2010, Lane 2011, Ngai and Sherris 2011, Olivieri and Pitacco 2008, Wan and Bertschi 2015.…”

Section: Financial Hedges To Help Mitigate Longevity Riskmentioning

confidence: 99%

Do actuaries believe in longevity deceleration?

Debonneuil

Loisel

Planchet

2018

Insurance: Mathematics and Economics

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As more and more people believe that significant life extensions may come soon, should commonly used future mortality assumptions be considered prudent? We find here that commonly used actuarial tables for annuitants -as well as the Lee-Carter model -do not extrapolate life expectancy at the same rate for future years as for past years; instead they produce some longevity deceleration. This is typically because their mortality improvements decrease after a certain age, and those age-specific improvements are constant over time. As potential alternatives i) we study the Bongaarts model that produces straight increases in life expectancy; ii) we adapt it to produce best-practice longevity trends iii) we compare with various longevity scenarios even including a model for "life extension velocity". iv) after gathering advances in biogerontology we discuss elements to help retirement systems cope with a potential strong increase in life expectancy.

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