Description: Mortality trend risk affects pension plans, life insurers, annuity writers and insurers of workers’ compensation, where the tail claims are mostly annuities. As with many risk sources, mortality risk can be broken down into process risk, parameter risk and model risk. In this paper, process risk, parameter risk and model risk are discussed using the fitted models. Presented at 2010 Enterprise Risk Management Symposium, Society of Actuaries, April 12-15, 2010.

Description: As a life reinsurer, understanding mortality risk is mission critical. Superior models of mortality risk lead to more competitive pricing in profitable market segments and more efficient use of capital. Surprisingly, modern statistical tools such as predictive modeling have not previously been used to model mortality data to gain this edge. In this paper, we present the use of a predictive modeling technique called projection pursuit regression PPR to model mortality data. We first describe the process of creating a PPR model using inter-company mortality data collected by the Individual Life Experience Committee of the Society of Actuaries, and present the resulting model. We then discuss the process of using this model as a starting point for creating a more detailed PPR model of internal company mortality data.