Adoption of projected mortality table for the Slovenian market using the Poisson log-bilinear model to test the minimum standard for valuing life annuities

• Main Authors: Darko Medved, Aleš Ahčan, Jože Sambt, Ermanno Pitacco
• Format: Article
• Language: English
• Published: University of Ljubljana 2015-01-01
• Series: Economic and Business Review
• Subjects: Solvency II; valuation of insurance liabilities; Lee-Carter; mortality projections; life expectancy
• Online Access: http://www.ebrjournal.net/ojs/index.php/ebr/article/view/83/pdf

With the introduction of Solvency II a consistent market approach to the valuation of insurance assets and liabilities is required. For the best estimate of life annuity provisions one should estimate the longevity risk of the insured population in Slovenia. In this paper the current minimum standard in Slovenia for calculating pension annuities is tested using the Lee-Carter model. In particular, the mortality of the Slovenian population is projected using the best fit from the stochastic mortality projections method. The projected mortality statistics are then corrected with the selection effect and compared with the current minimum standard.