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Crunching Mortality and Life Insurance Portfolios with extended CreditRisk+

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  • Jonas Hirz
  • Uwe Schmock
  • Pavel V. Shevchenko

Abstract

Using an extended version of the credit risk model CreditRisk+, we develop a flexible framework with numerous applications amongst which we find stochastic mortality modelling, forecasting of death causes as well as profit and loss modelling of life insurance and annuity portfolios which can be used in (partial) internal models under Solvency II. Yet, there exists a fast and numerically stable algorithm to derive loss distributions exactly, even for large portfolios. We provide various estimation procedures based on publicly available data. Compared to the Lee-Carter model, we have a more flexible framework, get tighter bounds and can directly extract several sources of uncertainty. Straight-forward model validation techniques are available.

Suggested Citation

  • Jonas Hirz & Uwe Schmock & Pavel V. Shevchenko, 2016. "Crunching Mortality and Life Insurance Portfolios with extended CreditRisk+," Papers 1601.04557, arXiv.org, revised Nov 2016.
    • Handle: RePEc:arx:papers:1601.04557
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    References listed on IDEAS

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    1. Andrew Cairns & David Blake & Kevin Dowd & Guy Coughlan & David Epstein & Alen Ong & Igor Balevich, 2009. "A Quantitative Comparison of Stochastic Mortality Models Using Data From England and Wales and the United States," North American Actuarial Journal, Taylor & Francis Journals, vol. 13(1), pages 1-35.
    2. Carter, Lawrence R. & Lee, Ronald D., 1992. "Modeling and forecasting US sex differentials in mortality," International Journal of Forecasting, Elsevier, vol. 8(3), pages 393-411, November.
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