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Bayesian Stochastic Mortality Modelling for Two Populations

Published online by Cambridge University Press:  09 August 2013

Andrew J.G. Cairns ,
David Blake ,
Kevin Dowd ,
Guy D. Coughlan  and
Marwa Khalaf-Allah
Andrew J.G. Cairns
Affiliation:
Maxwell Institute for Mathematical Sciences, and, Department of Actuarial Mathematics and Statistics, Heriot-Watt University, Edinburgh, EH14 4AS, UK., E-Mail: [email protected]
David Blake
Affiliation:
Pensions Institute, Cass Business School, City University, 106 Bunhill Row, London, EC1Y 8TZ, UK.
Kevin Dowd
Affiliation:
Pensions Institute, Cass Business School, City University, 106 Bunhill Row, London, EC1Y 8TZ, UK.
Guy D. Coughlan
Affiliation:
Pension Advisory Group, JP Morgan Chase Bank, 125 London Wall, London, EC2Y 5AJ, UK.
Marwa Khalaf-Allah
Affiliation:
Pension Advisory Group, JP Morgan Chase Bank, 125 London Wall, London, EC2Y 5AJ, UK.
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Abstract

This paper introduces a new framework for modelling the joint development over time of mortality rates in a pair of related populations with the primary aim of producing consistent mortality forecasts for the two populations. The primary aim is achieved by combining a number of recent and novel developments in stochastic mortality modelling, but these, additionally, provide us with a number of side benefits and insights for stochastic mortality modelling. By way of example, we propose an Age-Period-Cohort model which incorporates a mean-reverting stochastic spread that allows for different trends in mortality improvement rates in the short-run, but parallel improvements in the long run. Second, we fit the model using a Bayesian framework that allows us to combine estimation of the unobservable state variables and the parameters of the stochastic processes driving them into a single procedure. Key benefits of this include dampening down of the impact of Poisson variation in death counts, full allowance for paramater uncertainty, and the flexibility to deal with missing data. The framework is designed for large populations coupled with a small sub-population and is applied to the England & Wales national and Continuous Mortality Investigation assured lives males populations. We compare and contrast results based on the two-population approach with single-population results.

Keywords

Small sub-populationsage effectperiod effectcohort effectMarkov chain Monte Carloparameter uncertaintymissing data
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 41 , Issue 1 , May 2011 , pp. 29 - 59
Copyright
Copyright © International Actuarial Association 2011

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