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Assessment of longevity risk: credibility approach

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  • Bükre Yıldırım Külekci
  • A. Sevtap Selcuk-Kestel

Abstract

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.

Suggested Citation

  • Bükre Yıldırım Külekci & A. Sevtap Selcuk-Kestel, 2021. "Assessment of longevity risk: credibility approach," Journal of Applied Statistics, Taylor & Francis Journals, vol. 48(13-15), pages 2695-2713, November.
    • Handle: RePEc:taf:japsta:v:48:y:2021:i:13-15:p:2695-2713
    DOI: 10.1080/02664763.2021.1922613
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