Author
Listed:
- Severine Arnold (-Gaille)
(University of Lausanne)
- Anca Jijiie
(Faculty of Business and Economics)
- Eric Jondeau
(University of Lausanne and Swiss Finance Institute)
- Michael Rockinger
(University of Lausanne, Centre for Economic Policy Research (CEPR), and Swiss Finance Institute)
Abstract
The increase in life expectancy over the past several decades has been impressive and represents a key challenge for institutions that provide life insurance products. Indeed, when a new actuarial table is released with updated survival and death rates, such institutions need to update the amount of mathematical reserve that they need to set aside to guarantee the future payments of their annuities. As mortality forecasting techniques are currently well developed, it is relatively easy to forecast mortality over several decades and to directly use these forecast rates in the determination of the mathematical reserve needed to guarantee annuity payments. Future mortality evolution is then directly incorporated into the liabilities valuation of an institution, and it is thus commonly believed that such liabilities should not require much updating when a new actuarial table is released. In this paper, we demonstrate that contrary to this common belief, institutions that use generational tables (namely, tables including future mortality evolution) will most likely need to make more important adjustments (positive or negative) to their liabilities than will institutions using periodic (static) tables whenever a new table is released. By using three very different models to project mortality, we demonstrate that our findings are inherent in the required long horizons of the forecasts needed in the generational approach, with the uncertainty surrounding the forecast values increasing with the horizon. Therefore, generational tables may introduce more instability in a pension institution’s accounts than periodic tables.
Suggested Citation
Severine Arnold (-Gaille) & Anca Jijiie & Eric Jondeau & Michael Rockinger, 2017.
"Periodic or Generational Actuarial Tables: Which One to Choose?,"
Swiss Finance Institute Research Paper Series
17-71, Swiss Finance Institute.
Handle:
RePEc:chf:rpseri:rp1771
Download full text from publisher
Corrections
All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp1771. See general information about how to correct material in RePEc.
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
We have no bibliographic references for this item. You can help adding them by using this form .
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ridima Mittal (email available below). General contact details of provider: https://edirc.repec.org/data/fameech.html .
Please note that corrections may take a couple of weeks to filter through
the various RePEc services.