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Rethinking age-period-cohort mortality trend models. (English) Zbl 1401.91088

Summary: Longevity risk arising from uncertain mortality improvement is one of the major risks facing annuity providers and pension funds. In this article, we show how applying trend models from non-life claims reserving to age-period-cohort mortality trends provides new insight in estimating mortality improvement and quantifying its uncertainty. Age, period and cohort trends are modelled with distinct effects for each age, calendar year and birth year in a generalised linear models framework. The effects are distinct in the sense that they are not conjoined with age coefficients, borrowing from regression terminology, we denote them as main effects. Mortality models in this framework for age-period, age-cohort and age-period-cohort effects are assessed using national population mortality data from Norway and Australia to show the relative significance of cohort effects as compared to period effects. Results are compared with the traditional Lee-Carter model. The bilinear period effect in the Lee-Carter model is shown to resemble a main cohort effect in these trend models. However, the approach avoids the limitations of the Lee-Carter model when forecasting with the age-cohort trend model.

MSC:

91B30 Risk theory, insurance (MSC2010)
62J12 Generalized linear models (logistic models)
62P05 Applications of statistics to actuarial sciences and financial mathematics

Software:

Human Mortality
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