MODELLING MORTALITY DYNAMICS FOR PENSIONS AND ANNUITY BUSINESS

Transcription

1 GROUPE CONSULTATIF ACTUARIEL EUROPEEN SUMMER SCHOOL 2006 MODELLING MORTALITY DYNAMICS FOR PENSIONS AND ANNUITY BUSINESS ORGANIZED BY ISTITUTO ITALIANO DEGLI ATTUARI WITH THE ASSISTANCE OF FACULTY OF ECONOMICS, UNIVERSITY OF PARMA DEPARTMENT OF ECONOMICS, UNIVERSITY OF PARMA 29 August - 1 September 2006 Faculty of Economics - University of Parma via J. F. Kennedy, 6 - I Parma (Italy)

2 Overview In the context of Continuining Professional Development (CPD), the Groupe Consultatif Summer Schools tend to be structured learning programmes for people interested in developing their knowledge on a particular topic. Mortality improvements, uncertainty in future mortality trends and the relevant impact on annuities and pension schemes constitute particularly important topics in the field of actuarial mathematics and life insurance techniques. A Summer School on Modelling Mortality Dynamics for Pensions and Annuity Business was organized in 2005 by the Istituto Italiano degli Attuari, and hosted by the MIB School of Management in Trieste. The success of the 2005 Summer School induced the organizer to propose a second edition, and the Groupe Consultatif was pleased to accept this proposal. The 2006 Summer School will be hosted by the Faculty of Economics of the University of Parma. This Summer School will deal in particular with the following issues: Pricing annuities; Mortality trends; Forecasting mortality (with applications and examples); Longevity risk and its actuarial perspectives. Lecturers Michel Denuit, Professor of Statistics at the Catholic University of Louvain. He is the author of several papers on Statistics, Actuarial mathematics and Risk theory. Steven Haberman, Professor of Actuarial Science in the Cass Business School, City University, London, and Director of the Actuarial Research Centre. He has published many papers and coauthored several books in the field of actuarial science. Annamaria Olivieri, Professor of Financial Mathematics at the University of Parma. She is the author of several papers concerning actuarial mathematics and life and health insurance techniques. Ermanno Pitacco, Professor of Actuarial Mathematics at the University of Trieste, Academic Director of the Master in Insurance and Risk Management at the MIB School of Management, Trieste. He has published many papers and textbooks on actuarial mathematics and life insurance techniques. Organizing Committee Carla Angela (President of Istituto Italiano degli Attuari) Alberto Guenzi (University of Parma, Dean of the Faculty of Economics) Annamaria Olivieri (University of Parma) Ermanno Pitacco (University of Trieste) Giulio Tagliavini (University of Parma, Head of the Department of Economics) Summer School Secretariat Istituto Italiano degli Attuari Loredana Rocchi Via del Corea, 3 I Rome Tel , Fax [email protected] 2

3 Summer School Programme MODELLING MORTALITY DYNAMICS FOR PENSIONS AND ANNUITY BUSINESS 1. INTRODUCTION: PRICING ANNUITIES 1.1 The early actuarial model 1.2 Mortality: old assumption vs new scenario 1.3 The annuitisation guarantee: GAO & GAR 2. MORTALITY TRENDS 2.1 Survival tables 2.2 Curves of deaths 2.3 Mortality profiles 2.4 Life expectancy and other markers 2.5 Mortality scenarios: rectangularization and expansion 2.6 Impact on annuity values 3. FORECASTING MORTALITY: A REVIEW 3.1 A dynamic approach to mortality Single-figures versus age-specific functions A discrete, age-specific setting 3.2 Projection methods Projection by extrapolation of mortality rates Basic ideas Reduction factors The exponential formulae Other projection formulae Single-entry projected tables From a double-entry to a single-entry table Examples Age shifting Projecting mortality in a parametric framework Mortality laws and projections Makeham's law Weibull's law A law for the odds Heligman-Pollard law Interpolation versus extrapolation: the limit table Model tables The Brass relational method The "resistance function" Mortality graduation over age and time The Lee-Carter (LC) method: an introduction From LC to the Poisson log-bilinear model 3.3 Further issues A cohort approach versus a period approach Projections and scenarios Mortality by causes Mortality at very old ages Frailty models 3.4 A historical survey 3

4 4. FORECASTING MORTALITY: APPLICATIONS AND EXAMPLES 4.1 Mortality Reduction Factors: Conventional Approach (eg CMI Bureau in UK) 4.2 Mortality Reduction Factors: Modelling by GLMs Fitting and diagnostics Forecasting Prediction Intervals 4.3 Parametric Models and Time Series Methods Fitting and diagnostics Forecasting Prediction Intervals 4.4 Lee Carter Models: Basic Version Structure Standard version - fitting and diagnostics Poisson version fitting and diagnostics Forecasting Prediction Intervals Links to Mortality Reduction Factor Models 4.5 Lee Carter Models: Advanced 4.6 Lee Carter Models: Disaggregated Populations 4.7 Lee Carter models - Cohort-based Models 4.8 The Poisson and related versions of the LC model 4.9 Bootstrapping the LC model 4.10 Applications Life annuities portfolios Adverse selection Risk classification 4.11 Life insurance mathematics in the Lee-Carter framework 5. THE LONGEVITY RISK: ACTUARIAL PERSPECTIVES 5.1 Modelling the longevity risk 5.2 Managing the longevity risk A risk management perspective Natural hedging Solvency issues Reinsurance arrangements 5.3 Alternative risk transfers Securitization in life insurance Longevity bonds 5.4 Life annuities: the annuitisation option Annuitisation guarantees and uncertainty in mortality trends Annuitisation guarantees: an approach allowing for stochastic mortality The timing of annuitisation 4

5 General Information Dates 29 August - 1 September Venue Faculty of Economics, University of Parma, via J.F. Kennedy, 6 - I Parma Italy. venue Summer School schedule registration: 29 August, am start of lectures: 29 August, 9.00 am close: 1 September, pm Language English. No simultaneous translation will be provided. Number of participants Attendance at the 2006 Summer School is limited to 40 participants. Places are allocated strictly on a first-come-first-served basis. Applicants will be immediately informed about acceptance. Registration Form The Registration Form should be completed and returned to Summer School 2006 Secretariat. The deadline is 10 July. Registration Fee The registration fee is The registration fee includes: lecture material; lunches and coffee-breaks on 29, 30, 31 August and 1 September; Summer School dinner on 31 August. 5

6 Accommodation A list of hotels (applying special rates for the University of Parma) is enclosed. Participants must book hotels for themselves (quote University of Parma when booking). Among the listed hotels, Residenza Sant Ilario (the residence of the University of Parma) provides a good accommodation (without breakfast) at a very low rate (39.00 euro a day per person) and is very close both to the school venue and the city center. The residence is usually closed in summer time; however, in case at least 10 persons ask to lodge there, the residence will open from 28 August to 2 September. Travel to Parma BY TRAIN. The railway station of Parma (address: Piazzale C.A. Dalla Chiesa 11; Tel.: ) is located in the city centre; most hotels may be reached by bus or by taxi. Parma is served by one of the main Italian railway lines. Parma s station can be reached easily from southern and central Italy via Rome Florence Bologna or Genoa La Spezia, from northeastern Italy via Venice Bologna or Brennero Verona Bologna, and from northwestern Italy via Turin Milan. You can find detailed information on trains and timetables at the multilingual Trenitalia web address or you can contact the Call Center at the Italian number Trains are a cheap and comfortable means of transport in Italy, even though they sometimes may be a little late; so in case you have connections, be sure that your connecting times are not too strict. BY PLANE. Parma Airport "G. Verdi" (address: Via dell Aeroporto 44/A, Fontana Parma; Tel.: ; web site: is less than 3 km from the centre of Parma; the city center may be reached by bus (route no. 6) or by taxi. Parma may be easily reached by train from all of northern Italy main airports. International airport nearest to Parma are: Milano Linate (130 km from Parma; web site: railway station: Milano Centrale), Milano Malpensa (160 km; web site: railway station: Milano Centrale), Bologna Marconi (100 km; web site: railway station: Bologna Centrale), Venezia M. Polo (220 km; web site: railway station: Venezia Mestre), Verona (150 km; web site: railway station: Verona Porta Nuova), Bergamo Orio al Serio (160 km; web site: railway station: Bergamo), Pisa G. Galilei (180 km; web site: railway station: Pisa), Genova C. Colombo (220 km; web site: railway station: Genova Piazza Principe or Genova Brignole). BY CAR. The "Parma" exit is on the A1 Milan Naples motorway, which connects traffic from France, via Turin, and from Switzerland, via Chiasso Como, with Campania, Calabria and Sicily. Travellers from the Adriatic regions, reach Bologna on the A14, via Bari Pescara Ancona Rimini, while those coming from the Autobrennero, via Verona, take the A1 to Modena. Those coming from the A15 Parma La Spezia, from either the Ventimiglia Genoa or the Leghorn direction, can leave at the "Parma Ovest" exit, situated on the A15, or continue along the A1 and leave at the "Parma" exit. The Italian Motorways website ( provides detailed information on the Italian roadways (offices in Parma of the Italian Motorway company may be contacted at the phone number ). In Italy, you have to pay a toll based on the length of your trip and on the region you are travelling through. BY COACH. Eurolines ( organises coaches leaving from the main European cities for Parma and vice versa. Eurolines lines connect Parma to many European cities such as London, Paris, Amsterdam, Brussels, Barcelona, Madrid, Warsaw, Cracow, Prague, Bratislava and Budapest. Coaches arrive at and leave from Parma railway station (address: Piazzale C.A. Dalla Chiesa) on alternate days. City transport services The Summer School venue is within walking distance from most of the hotels. A regular bus service is available (routes no. 3, 4, 5 to via D Azeglio; depending on the hotel location, some connections may be necessary). Buy the bus ticket at a tobacco shop or using a ticket dispenser; tickets are also available on buses, with some extra-charge. Scholarships A contribution to cover the Summer School expenses can be provided for two young actuaries (under 30) from emerging countries. Applicants are requested to submit the Registration Form with a curriculum vitae to the Summer School 2006 Secretariat not later than 15 May. The scholarships will cover travelling and hotel expenses as well as the registration fee up to a maximum amount of 1, Cancellation policy The registration fee is refundable provided the 2006 Summer School Secretariat is notified in writing on or before 20 July. There is a administrative fee for all refunds. After 20 July there will be no refund for cancellation. 6

7 R e g i stration Form Please complete this Registration form in block letters and return to 2006 Summer School Secretariat by fax ( ) or [email protected] not later than 10 July Surname Prof. Mrs. Ms. Mr. Other First name Actuarial Association Mailing address: business home City Zip Code Country Telephone Telefax Dietary Requirements: Please indicate method of payment ( Euro): Please note Registration will not be effective until this payment has been received. I am transferring (all costs to me) to the following bank account Account name: Istituto Italiano degli Attuari Name of Bank: Banca di Roma, Ag. Roma 100 Bank address: Piazza del Parlamento, Rome, Italy IBAN: IT 31 K (country: IT; CIN Eur: 31; CIN: K; ABI: 03002; CAB: 05001; account number: ) Please, - ensure that your name is included on the transfer - enclose a copy of your bank s receipt with this form or I am sending a cheque, payable to Istituto Italiano degli Attuari, to the 2006 Summer School Secretariat Date: Signature: 7

8 Hotels ***** Grand Hotel de la Ville Largo P. Calamandrei n PARMA (PR) Tel Fax Web site: [email protected] (2.3 km from School venue) **** Villa Ducale Hotel Via Moletolo, 53/a PARMA (PR) Tel Fax Web site: [email protected] (3.3 km from School venue) Jolly Hotel Stendhal Via Bodoni, PARMA (PR) TeL Fax Web site: [email protected] (1.4 km from School venue) Park Hotel Toscanini V.le Toscanini, PARMA (PR) Tel Fax Web site: [email protected] (1.0 km from School venue) StarHotels Du Parc Viale Piacenza, 12/c PARMA (PR) Tel Fax Web site: [email protected] (0.8 km from School venue) Hotel Palace Maria Luigia V.le Mentana, PARMA (PR) Tel Fax Web site: [email protected] (1.7 km from School venue) Hotel Verdi Via Pasini, PARMA (PR) Tel Fax Web site: [email protected] (0.4 km from School venue) *** Astoria Executive Hotel Via Trento, PARMA (PR) Tel Fax Web site: [email protected] (1.7 km from School venue) Hotel Torino B.go Angelo Mazza, PARMA (PR) Tel Fax Web site: [email protected] (1.3 km from School venue) Hotel Principe Via Emilia Est, PARMA (PR) Tel Web site: [email protected] (2.6 km from School venue) Hotel Daniel Via Gramsci, 16/A PARMA (PR) Tel Fax Web site: [email protected] (0.6 km from School venue) Best Western Hotel Farnese Via Reggio, 51/a PARMA (PR) Tel Fax Web site: (1.4 km from School venue) Hotel Button Via Salina, PARMA (PR) Tel Fax (1.3 km from School venue) Hotel Savoy Via Garibaldi, 69/b PARMA (PR) Tel Fax Web site: [email protected] (1.2 km from School venue) Residenza Sant Ilario (University of Parma) (see remark) Borgo Bosazza, PARMA (PR) Tel Fax Web site: [email protected] (0.7 km from School venue) Remark: Residenza Sant Ilario (the residence of the University of Parma) provides a good accommodation at a very low rate (39.00 euro a day per person breakfast is not served) and is very close both to the school venue and the city center. The residence is usually closed in summer time; however, in case at least 10 persons ask to lodge there, the residence will open from 28 August to 2 September. Further information about hotels (and a further list of hotels) are available at: Useful links to learn more about Parma (how to get there, touristic information, meteo, culture and territory, events) turismo.comune.parma.it/h3/h3.exe/a1/fpaolaeng?lgn.x=eng 8