Daniel H. Alai, Zinoviy Landsman and Michael Sherris
Systematic improvements in mortality increases dependence in the survival distributions of insured lives. This is not accounted for in standard life tables and actuarial models used for annuity pricing and reserving. Furthermore, systematic longevity risk undermines the law of large numbers; a law that is relied on in the risk management of life insurance and annuity portfolios. This paper applies a multivariate Tweedie distribution to incorporate dependence, which it induces through a common shock component.
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