A single individual on their 65th birthday simultaneously purchasing a life insurance policy, an immediate annuity, a deferred annuity and a defined benefit option will receive many different mortality expectations from the actuarial community, none of them likely the same. While the actuary's mortality expectations are based on years of historical experience and underwriting/selection criteria; it is a curious question of how varied these mortality expectations are for this individual.

Additionally, it is a curious question whether a single individual (or a corporation seeking to create wealth through selective arbitrage opportunities) can use the current pricing methodologies of financial services products to their advantage and leverage one purchase against another and select against the financial services industry.

Purpose

The purpose of this project is to educate actuaries and other interested parties on the relative differences in older age mortality expectations in insurance, annuity and pension products; and to increase awareness of any implications any differences in mortality expectations can have on managing mortality expectations and mortality risks for older age financial services products.

The overall objective for this project is to illustrate current-market mortality expectations for multiple financial services products for at least an individual 65 years of age, both individual underwritten products and guaranteed issue group products; and to perform a limited analysis of each product's susceptibility to mortality arbitrage. This is to be accomplished by surveying a limited number of financial services companies for their mortality expectations for 5 specific individuals age 65 for each financial services product described in Section I. These individuals will be chosen to correspond to the recent SOA preferred life insurance mortality study underwriting criteria for a Male Preferred Nonsmoker, Male Standard Nonsmoker (not necessarily residual) Male Standard Smoker (not necessarily residual), Male Substandard Nonsmoker Table 8, and Female Standard Nonsmoker. These individuals will be described by a set of underwriting criteria and of course may or may not be classified by the financial services company to exactly match the intended classification. The researcher(s) will survey and summarize findings in a report that addresses at a minimum the following items:

• A summary of the number of financial services companies providing mortality expectations on each product type. The target is at least 5 financial services company mortality expectations for each product type.
• An illustration of the average mortality expectation for each product type. It is anticipated that the product types would include:
• $100,000 individually underwritten life insurance policy
• $100,000 guaranteed issue group life insurance policy
• $100,000 deposit immediate annuity
• $100,000 deposit deferred annuity
• $5,000 per month group pension benefit
• Each product's susceptibility to mortality arbitrage

Each participating company should expect in return for their efforts detailed mortality results from the study as well as assurances that nobody other than the researcher will see their mortality results.

It is expected that the researcher(s) will work closely with a Project Oversight Group (POG) in finalizing the mortality data to be collected (e.g.. ages, policy sizes, underwriting classes/criteria to be studied.), the list of financial services companies to be surveyed, the survey and finalizing the format of the survey results. The researcher(s) will also provide the POG with periodic progress reports. Members of this group will be available to provide feedback and guidance to the researcher(s) as needed.

A relatively short term project is envisioned with the report completed within 6 months from the starting date.

To facilitate the evaluation of proposals, the following information should be submitted:

1. Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education, and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
2. Cost estimates for the research, including computer time, salaries, report preparation, research costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included.
Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
3. A schedule for completion of the research, identifying key dates or time frames for research completion and report submission. The research should be completed in a time frame covering no longer than six months.
4. Ideas regarding the form and distribution of the final report, both for immediate release and for permanent reference (e.g., submission to North American Actuarial Journal or other refereed publication, SOA Monograph Series, CD ROM).
5. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

The SOA's Reinsurance Section Council (RSC) is responsible for the selection of the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the RSC will make the final decision. The SOA's Research Actuary will provide staff actuarial support. A Project Oversight Group (POG) will be appointed by the RSC to oversee the project upon selection of the proposal.

Any questions regarding this RFP should be directed by fax or e-mail to:

Ronora Stryker, SOA Research Actuary
e-mail: rstryker@soa.org
f: 847.273.8514.

If you intend to submit a proposal, please send written notification
by October 8, 2010 to:

Jan Schuh, SOA Research Administrator
e-mail: jschuh@soa.org
f: 847.273.8556

Please e-mail a copy of the proposal to:

Jan Schuh at jschuh@soa.org

Proposals must be received no later than October 15th, 2010. It is anticipated that all researchers who have submitted proposals will be informed of the status of their proposal no later than November 19th, 2010.

Note: Proposals are considered confidential and proprietary.

The Society of Actuaries reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available to proceed. The Society of Actuaries also reserves the right to redirect the project as is deemed advisable.

The Society of Actuaries intends to copyright and publish the results of this research. The research will be considered work-for-hire and all rights thereto belong to the Society of Actuaries. However, appropriate credit will be given to the researcher(s).