Actuarial and Quantitative Risk
The Global Risks Alliance (GRA)
Mortality and longevity assumptions decide the cost of life insurance, annuities and pensions. Base tables describe current death rates; improvement projections estimate how they will fall. Small errors compound over decades. Pandemics, medical advances and social change make the future uncertain. This page sets out how mortality and longevity risk are estimated, where estimates go wrong, the data and models used and who decides.
Fig.Reserving workbench. Design wireframe with placeholder names and illustrative values, not a record or a live system.
Mortality and longevity risk is the uncertainty in how many people die and how long they live, which decides the cost of life insurance, annuities and pensions. Base tables and improvement projections estimate it, with small errors compounding over decades. Actuaries, trustees, boards, supervisors and governments hold the decisions.
For mortality and longevity, in GRA's spatial-finance reading, the map opens on population density and night lights with built-up and settlement extent from NASA GIBS, framed on Japan and Korea; 4 further NASA layers wait in the list.
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For mortality and longevity, in GRA's spatial-finance reading, the map opens on population density and night lights with built-up and settlement extent from NASA GIBS, framed on Japan and Korea; 4 further NASA layers wait in the list.Satellite and model products as NASA publishes them, each with its own date; indicators, not assessments of any place; claim ceiling INTEGRATED.
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Health, heat and demographic change in life and pension risk. The dossier below sets out how the risk develops, what is measured, where the data come from, how it is modelled and who decides.
A small error in the annual rate of mortality improvement grows across decades of annuity payments, changing liability values materially.
Insured and pension populations differ from national populations in income and health. Applying national tables without adjustment misstates mortality.
Pandemics raise mortality in the short term and may change trends afterward. Deciding how much weight to give recent data is a judgement.
Pension schemes and insurers transfer longevity risk through buy-ins, buy-outs and longevity swaps, concentrating it in insurers and reinsurers.
Each term as this page uses it. Where a standard-setting body defines the term, the wording follows that body.
| Term | Definition |
|---|---|
| Base mortality table | A table of current death rates by age and sex for a population. |
| Mortality improvement | The rate at which death rates fall over time at each age. |
| Pension buy-out | A transaction in which an insurer takes over a pension scheme's liabilities. |
Each indicator carries its unit, its cadence, the kind of source behind it and the evidence label a value would carry. No values are shown: a programme supplies them under its own authority.
| Indicator | Unit | Cadence | Source type | Label |
|---|---|---|---|---|
| Period life expectancy at stated age | years | annual | National life tables | OFFICIAL |
| Annual mortality improvement rate | percent per year | annual | Mortality studies | ESTIMATED |
| Actual-to-expected mortality | ratio | annual | Experience studies | ESTIMATED |
| Excess mortality | percent above baseline | periodic | Civil registration analysis | ESTIMATED |
| Longevity risk transfer volumes | currency | annual | Industry reports | REPORTED |
| Life expectancy gap by deprivation | years | periodic | National statistics | OFFICIAL |
The topic as a computational graph: named sources feed the methods, an evidence review gates the outputs, and the decisions stay with the authorities that hold them.
Fig. 02Nodes carry their type, two metric rows and a state; connectors show what feeds what; dashed frames name the owners; the timeline is the cadence. Design of the pipeline, not a record of a run.
Named public datasets and institutional records, each with its licence class. Sources by agreement are used only under their terms and never republished.
| Source | What it gives | Licence class |
|---|---|---|
| Human Mortality Database | Detailed national mortality data | CC BY 4.0 |
| Continuous Mortality Investigation outputs | UK mortality projections and studies | Members and subscribers; summaries public (to check) |
| Society of Actuaries mortality tables and improvement scales | United States insured and pension mortality | Free, SOA terms |
| UN World Population Prospects | Global mortality estimates and projections | CC BY 3.0 IGO |
| Office for National Statistics and national statistics offices | National life tables and deaths | Open Government Licence or terms per office |
Actuarial and Quantitative Risk prepares evidence. The decisions below are taken by the authorities named, under their own rules, and never by the platform.
| Who decides | The question | Evidence this page serves |
|---|---|---|
| Life and pension actuaries | Which tables and improvement assumptions to use | Experience studies, national data and projection models |
| Pension trustees and insurer boards | Whether to transfer longevity risk | Liability sensitivity and transfer pricing |
| Supervisors | Whether longevity assumptions are prudent | Assumption benchmarks |
| Governments | How state pension ages and benefits respond to longevity | National projections |
Life expectancy has risen over long periods in most countries, driven by reductions in infant mortality, infectious disease and, more recently, cardiovascular mortality. Improvement rates have varied and in some countries slowed, and they differ markedly by socioeconomic group. Pandemics produce sharp excess mortality and can leave lasting effects on health. Extreme heat raises mortality, particularly among older people, and its effects are expected to grow with warming and ageing.
Projection models, such as the Lee-Carter family and its extensions, extrapolate historical trends in age-specific mortality, while cause-of-death and expert-based approaches try to reflect underlying drivers. All face the difficulty that future medical advances and health behaviours are unknowable, so projections carry wide uncertainty over long horizons.
For pension schemes, small changes in assumed life expectancy can materially change liabilities. Basis risk arises when a scheme's members differ from the population whose data were used for projections.
Extrapolating trends with uncertainty; past trends may not continue.
Studying a portfolio's own mortality; small portfolios have noisy data.
Measuring deaths above expected levels in pandemics or heatwaves.
Limits: population data lag and may be revised, socioeconomic detail is often missing, and long-term projections cannot anticipate medical breakthroughs or new health threats.
The current service level is R0: information and enquiries. An enquiry receives a reference and names the next step; applications, payments, compute allocations and registrations open only when their team, terms and review capacity exist.