Creating portfolio-specific mortality tables: a case study
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Effective risk management of a portfolio demands accurate and succinct models which explain the main risk factors. Since portfolios have detailed individual records, an ideal approach is to use survival models. We look at a case study of how the administrator of a large multi-employer pension scheme created its own mortality tables. In addition to looking at statistical tests of fit, we consider a process for checking the suitability of a model for financial purposes. We also illustrate how a given scheme can test whether its experience is significantly different from other schemes, even after allowing for various known risk factors.
KeywordsGraduation Longevity risk Mortality Survival model
The authors thank Gavin P. Ritchie, Dr. Iain D. Currie and Stuart McDonald for helpful comments. Any errors or omissions remain the sole responsibility of the authors. Data preparation was done using bespoke C++ programs to create a longitudinal view of each pensioner from a sequence of in-force extracts and movement files. Data validation and preparation for modelling were done using Longevitas Development Team , which was also used to fit all the models and perform the bootstrapping analysis. Graphs were done in R  and typesetting was done in pdfLaTeX.
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