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A Credibility Approach to Mortality Risk

Published online by Cambridge University Press:  29 August 2014

M.R. Hardy  and
H.H. Panjer
M.R. Hardy*
Affiliation:
University of Waterloo, Ontario
*
Department of Statistics and Actuarial Science, University of Waterloo Waterloo, Ontario, CanadaN2L 3G1
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Abstract

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Bühlmann-Straub credibility is used to find an estimate of the mortality loss ratio for a company, relative to a standard table, for use in the statutory valuation of life insurance business. A method for calculating the margin for adverse deviation to be added to the mortality rate (in accordance with the general principle of Canadian statutory valuation) is derived. Applying credibility further to the variance of the mortality loss ratio gives a methodology for calculating the amount of the surplus (i.e. capital) required to cover annual fluctuations in mortality experience. The necessary structural parameters are calculated from industry statistics; the methodology is illustrated using Canadian life insurance data.

Keywords

SolvencyBühlmann-Straub Credibilitymortality
Type
Workshops
Information
ASTIN Bulletin: The Journal of the IAA , Volume 28 , Issue 2 , November 1998 , pp. 269 - 283
Copyright
Copyright © International Actuarial Association 1998

References

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Hardy, M.R. and Panjer, H.H. (1996). Mortality Risk: Margin and Capital Needs. Institute of Insurance and Pensions Research, University of Waterloo. Research Report 96-10.Google Scholar
Klugman, S., Panjer, H.H. and Willmot, G.E. (1997). Loss Models: From Data to Decisions. John Wiley and Sons (forthcoming).Google Scholar
Pentikäinen, T. and Pesonen, M. (1988). Stochastic dynamic analysis of life insurance. Transactions of the 23rd International Congress of Actuaries 1, p. 421.Google Scholar