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Modelling and management of mortality risk: a review

Author

Listed:
  • Andrew Cairns
  • David Blake
  • Kevin Dowd

Abstract

In the first part of the paper, we consider the wide range of extrapolative stochastic mortality models that have been proposed over the last 15–20 years. A number of models that we consider are framed in discrete time and place emphasis on the statistical aspects of modelling and forecasting. We discuss how these models can be evaluated, compared and contrasted. We also discuss a discrete-time market model that facilitates valuation of mortality-linked contracts with embedded options. We then review several approaches to modelling mortality in continuous time. These models tend to be simpler in nature, but make it possible to examine the potential for dynamic hedging of mortality risk. Finally, we review a range of financial instruments (traded and over-the-counter) that could be used to hedge mortality risk. Some of these, such as mortality swaps, already exist, while others anticipate future developments in the market.

Suggested Citation

  • Andrew Cairns & David Blake & Kevin Dowd, 2008. "Modelling and management of mortality risk: a review," Scandinavian Actuarial Journal, Taylor & Francis Journals, vol. 2008(2-3), pages 79-113.
    • Handle: RePEc:taf:sactxx:v:2008:y:2008:i:2-3:p:79-113
    DOI: 10.1080/03461230802173608
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    Cited by:

    1. Barigou, Karim & Loisel, Stéphane & Salhi, Yahia & Vigneron, Rayane, 2026. "Gaussian Process-Based Mortality Monitoring using Multivariate Cumulative Sum Procedures," LIDAM Discussion Papers ISBA 2026004, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    2. José Garrido & Xavier Milhaud & Anani Olympio & Max Popp, 2024. "Climate Risk and its Impact on Insurance [Risque climatique et impact en assurance]," Post-Print hal-04684629, HAL.
    3. FLICI, Farid, 2016. "The future of longevity and life annuities pricing in Algeria: comparison of mortality models," SocArXiv 2tdgm, Center for Open Science.
    4. Fang, Lei & Härdle, Wolfgang Karl & Park, Juhyun, 2016. "A mortality model for multi-populations: A semi-parametric approach," SFB 649 Discussion Papers 2016-023, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    5. Lei He & Tianquan Zhong & Zhenqi Wang, 2023. "Assessing Delayed Retirement Policies Linked to Dynamic Life Expectancy with Stochastic Dynamic Mortality," Mathematics, MDPI, vol. 11(24), pages 1-16, December.
    6. Hainaut, Donatien, 2026. "An economic-environmental approach for regional mortality," LIDAM Discussion Papers ISBA 2026001, Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA).
    7. Zuo, Wenyun & Damle, Anil & Tuljapurkar, Shripad, 2025. "Sensitivity and uncertainty in the Lee–Carter mortality model," International Journal of Forecasting, Elsevier, vol. 41(2), pages 781-797.
    8. Martin Bladt & Andreea Minca & Oscar Peralta, 2026. "Approximations of semi-Markov processes and insurance policy valuation," Finance and Stochastics, Springer, vol. 30(1), pages 237-276, January.
    9. Matthias Börger & Arne Freimann & Jochen Ruß, 2023. "On the economics of the longevity risk transfer market," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 90(3), pages 597-632, September.
    10. Hanewald, Katja, 2009. "Lee-Carter and the macroeconomy," SFB 649 Discussion Papers 2009-008, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    11. Katja Hanewald & Thomas Post & Helmut Gründl, 2011. "Stochastic Mortality, Macroeconomic Risks and Life Insurer Solvency," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 36(3), pages 458-475, July.
    12. Basellini, Ugofilippo & Camarda, Carlo Giovanni & Booth, Heather, 2023. "Thirty years on: A review of the Lee–Carter method for forecasting mortality," International Journal of Forecasting, Elsevier, vol. 39(3), pages 1033-1049.
    13. Susanna Levantesi & Matteo Lizzi & Andrea Nigri, 2024. "Enhancing diagnostic of stochastic mortality models leveraging contrast trees: an application on Italian data," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(2), pages 1565-1581, April.
    14. Benjamin Avanzi & Lewis De Felice, 2025. "Optimal strategies for the decumulation of retirement savings under differing appetites for liquidity and investment risks," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 48(2), pages 993-1030, December.
    15. Basellini, Ugofilippo & Camarda, Carlo Giovanni & Booth, Heather, 2022. "Thirty years on: A review of the Lee-Carter method for forecasting mortality," SocArXiv 8u34d, Center for Open Science.
    16. repec:osf:socarx:2tdgm_v1 is not listed on IDEAS
    17. Petar Jevtić & Chengwei Qin & Hongjuan Zhou, 2023. "Multi-population mortality modeling with Lévy processes," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 46(2), pages 583-609, December.
    18. repec:osf:socarx:8u34d_v1 is not listed on IDEAS
    19. Annamaria Olivieri & Daniela Tabakova, 2025. "Stochastic assessment of special-rate life annuities," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 48(2), pages 913-932, December.

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