Articles - Mortality assumptions remain internationally inconsistent


Cass academics warn of serious implications for investors

 Five years on from their study warning that actuaries must address the ‘considerable differences’ in mortality assumptions across the EU, academics from Cass Business School, which is part of City University London, and Kingston University have discovered that nothing has changed.
  
 The paper questions whether the differences in the mortality assumptions can be justified by the data, and calls on actuaries to take a more consistent approach across countries, warning that this lack of consistency could have significant implications for investors and organisations across the world.
  
 The widest variation in assumed life expectancy in the study was between France and Denmark, where actuaries assume that a 65 year old man can expect to live for 27.5 years in the former and 15.1 years in the latter, a difference of more than twelve years.
  
 The paper ‘Second International Comparative Study of Mortality Tables for Pension Fund Retirees’, by Cass Professors Steve Haberman and Richard Verrall withTerry Sithole of Kingston University, updates a previous study from 2006 which comparedmortality assumptions used in the valuation of defined benefit pension liabilities in Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Netherlands, Spain, Sweden, Switzerland, UK and USA.  
  
 Professor Verrall said: “It is not surprising that the mortality assumptions used in company pension schemes should vary from country to country, due to variations in underlying population mortality as well as variations of the profile of typical membership of a company pension scheme. However, it appears that variations in mortality assumptions are much greater than would be justified by these factors alone.”
  
 Commenting on the importance of the conclusions of the study, Professor Haberman said: “Defined benefit pension liabilities can form a significant item on the balance sheet of many companies. If, for example, a company is the subject of a merger or acquisition and the jurisdiction of the regulations governing the pension liability changes, this can have a significant impact on the transaction.”
  
 The 2006 study was funded by the Actuarial Profession and a group of firms of consulting actuaries. This new project was requested by the IAA Mortality Task Force because new mortality tables have been adopted in some countries since the original study, and, in many cases, the population mortality data have also been updated.  The underlying research work has been funded by the Actuarial Profession through the Mortality Research Steering Group.
  
 The paper will be presented by the authors at the Staple Inn Hall, London on 20 June 2011 at 5pm.

Back to Index


Similar News to this Story

Inflation risk premium why think about it now
An inflation risk premium (IRP) is nothing new. Market-implied inflation has historically been higher than actual realised inflation. There is only
Workplace emergency savings
Nest Insight event dedicated to workplace emergency savings, where we’ll share the latest findings from our research trials and hear from other practi
How to identify the key issues early in reserving
This article looks at how an analytical approach to reserving can help actuaries focus on what really matters, right at the start of the process. We s

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.