The Continuous Mortality Investigation released its latest Mortality Projections Model, CMI_2018, today. Compared to the last model (CMI_2017), CMI_2018 adds data on deaths from across the UK population up to the end of 2018 and places more weight on lower mortality improvements in recent years. Both changes will decrease projected life expectancies and therefore scheme liabilities – meaning projected life expectancy at age 65 will fall by almost half a year.
The updated model also introduces a new way to allow for higher or lower improvements in sub-populations (for example pension scheme members) compared to the population as a whole, which should provide a more intuitive way of reflecting such differences.
Matthew Fletcher, senior longevity consultant at Aon, said: “While the pensions industry still expects mortality rates to improve, by increasing the weight placed on recent mortality improvements, the new model reflects the growing evidence that these improvements are likely to be slower in the near term than the historically high rates seen in the years up to 2011.
“The CMI model is based on mortality data across the whole population, but we are often trying to estimate life expectancies for a sub-population – for example members of defined benefit pension schemes where evidence suggests that mortality improvements may have been higher than across the broader population. With previous versions of the model, the only easy way to reflect this was to reduce the weight put on recent low improvements.
Matthew Fletcher continued: “We’re therefore really pleased to see that CMI has added the facility to increase or decrease initial rates of improvement more easily. This should allow actuaries a more straightforward way to explain any adjustments they are making to the model to reflect improvements for sub-populations.”
Martin Bird, senior partner & head of Risk Settlement, said: “The insurers and reinsurers have continued to evolve their pricing models in light of emerging data and we expect these updates to the CMI’s model to be routinely adopted, reflecting the now strong evidence that underlying longevity improvements are materially lower than seen in the first decade of this century.”
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