Assessment of longevity risk: credibility approach

Kulekci B. Y. , Kestel A. S.

JOURNAL OF APPLIED STATISTICS, vol.48, no.13-15, pp.2695-2713, 2021 (Peer-Reviewed Journal) identifier identifier identifier

  • Publication Type: Article / Article
  • Volume: 48 Issue: 13-15
  • Publication Date: 2021
  • Doi Number: 10.1080/02664763.2021.1922613
  • Journal Indexes: Science Citation Index Expanded, Scopus, Academic Search Premier, ABI/INFORM, Aerospace Database, Business Source Elite, Business Source Premier, CAB Abstracts, Veterinary Science Database, zbMATH
  • Page Numbers: pp.2695-2713
  • Keywords: Longevity risk, Lee&#8211, Carter mortality model, B&#252, hlmann credibility, pension fund, annuity, LEE-CARTER MODEL, MORTALITY, IMPACT


To correctly measure the effect of mortality rates on the stability of insurance and pension provider's financial risk, longevity risk should be considered. This paper aims to investigate the future mortality and longevity risk with different age structures for different countries. Lee-Carter mortality model is used on the historical census data to forecast future mortality rates. Turkey, Germany, and Japan are chosen concerning their expected life and population distributions. Then, the longevity risk on a hypothetical portfolio is assessed based on static and dynamic mortality table approaches. To determine the impact of longevity risk, which is retrieved using a stochastic mortality model, a pension insurance product is taken into account. The net single premium for an annuity is quantified under the proposed set up for the selected countries. Additionally, the credibility approach is proposed to establish a reliable estimate for the annuity net single premium.