Information Matrix

At this time of year insurers have commenced their annual valuation of liabilities, part of which involves setting a mortality basis.  When doing so it is common for actuaries to separate the basis into two components.

It is quite common for a pension scheme to want to reduce its risk, but to be unable to afford a full buy-out.  The question is how best to reduce risk with the funds available, i.e. which liabilities to buy out first.