Improving performance and productivity of the pension and insurance industries

In summary

Although indicative of social progress, the continued increase in life expectancy in much of the world poses significant challenges to governments, private pension plans, and life insurers, because of its impact on pension and health costs.

The accurate modelling and forecasting of human mortality therefore is crucial to pensions, life insurance, demography, healthcare, and finance.

The researchers developed the R package StMoMo. This implements the most significant mortality projection models, and has been used worldwide to raise confidence in forecasts, and to allow organisations to improve regulation and performance of the pension and insurance industry.

What did we explore and how?

Actuaries and demographers have devoted significant time and effort to the development of statistical techniques for the modelling and projection of mortality rates. The StMoMo framework incorporates several prominent models developed prior to it.

The first significant, novel contribution of this research was the introduction of the unifying generalised age-period-cohort (GAPC) modelling framework. This incorporates the majority of existing models used by researchers and practitioners.

The researchers then implemented the GAPC framework in the StMoMo R package. This increases the efficiency with which existing models can be applied. It also allows users to construct new, custom mortality models.

Benefits and influence of this research

The research and its resulting work, the StMoMo package, are having an ongoing impact on financial services regulators, insurance and reinsurance companies, pension funds, consulting firms, universities, research centres, and individual users worldwide.

The StMoMo package has been downloaded over 35,000 times, and been referenced or cited in over 90 publication outputs.

StMoMo is used by the European Insurance and Occupational Pensions Authority (EIOPA), an independent advisory body to the European Commission, the European Parliament, and the Council of the European Union. EIOPA guides the regulation of the huge European insurance and private pension markets.

StMoMo is also used by regulators such as AMF in Canada, and the Financial and Insurance Supervisory Authority of Peru, and by Statistics Offices in Norway and Hungary.

The package has also enabled more efficient professional practice for major organisations such as Hannover Re, SCOR, Legal & General, and Milliman, leading to cost and time savings.

The research that underpins the development of StMoMo mortality projection software has contributed to the School being recognised for its modelling of mortality and longevity.