A new mortality model has been launched by UK actuarial body, The
Actuarial Profession (TAP), to address significant life expectancy
increases since it last published projections in 2002.
Gordon Sharp, chairman of TAP’s continuous mortality investigation
bureau (CMI), explained that the body became concerned last year by
continued widespread use of a single set of projections. Termed
‘interim cohort projections’ they encompass short, medium and
long-cohort projections which have become increasingly
out-of-date.
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Of particular concern were short and medium cohort projections
based on the assumption of a rapid tail-off in rates of improvement
in future mortality, which are not being reflected in recent
mortality data published by the CMI and the UK’s Office of National
Statistics.
“While many actuaries now make adjustments to these projections
when providing actuarial advice in this area, the projections do
not reflect recent mortality experience and may therefore no longer
be a sound platform on which to build further adjustments,” said
Sharp.
He added that it is also difficult for regulators and others to
judge the reasonability of different assumptions.
In response to concerns, the CMI set up a working party which
developed the new model which is designed to:
• Reflect the latest mortality trends;
• Be relatively straightforward to understand and describe;
• Allow users flexibility to modify projections tailored to their
own views and purpose; and
• Be regularly updated to reflect emerging experience.
Richard Willets, chairman of the new model’s working party, noted
that in the very short-term the best guide to the likely pace of
change in mortality rates is the most recently observed
experience.
On the need for flexibility, Willets said, in the long term, forces
driving mortality change may be very different from those now
influencing patterns of improvement.
Speaking enthusiastically about the new model’s benefits, Sharp
said it will equip actuaries to better demonstrate the impact of
mortality assumptions in the same scenario-testing way as financial
assumptions.
“This launch gives actuaries the tools to make that leap,” said
Sharp.
