New paper on modelling mortality shocks
The British Actuarial Journal has just published an article on modelling mortality shocks, such as those caused by COVID-19. The final open-access article can be viewed here (there is an earlier preprint here).
The COVID-19 pandemic creates a challenge for actuaries analysing experience data that includes mortality shocks. Any analysis of mortality levels will be biased by the temporarily higher mortality. Also, depending on where the shocks sit in the exposure period, any attempt to identify mortality trends will be distorted. The paper presents a methodology for analysing portfolio mortality data that offers local flexibility in the time dimension. The approach permits the identification of seasonal variation, mortality shocks and late-reported deaths. The methodology also allows actuaries to measure portfolio-specific mortality improvements. Finally, the method assists actuaries in determining a representative mortality level for long-term applications like reserving and pricing, even in the presence of mortality shocks. The methodology is implemented in the Longevitas survival-modelling software.
Richards, S. J. (2022) Allowing for shocks in portfolio mortality models, British Actuarial Journal, Vol. 27, e1, pp. 1–22, doi 10.1017/S1357321721000180.