Demographic Horizons™

Longevity Risk Analysis

Our stochastic analysis approach combines three components of longevity risk:

• Per-individual risk
• Base mortality risk
• Improvement risk

Whilst the key risk relates to improvements, understanding the base mortality risk is critical for pricing, and driven by our robust approach to base mortality modelling.

Our best estimate for mortality improvements is based on the traditional CMI framework, and calibrated against longevity swap market pricing.

The Demographic Horizons™ longevity risk framework is able to produce internally consistent and credible longevity risk figures on any time horizon from one year to all-of-time (run-off), using market data and historic model volatility to allow for the impact of a change in views on improvements outside the time horizon.

Working closely with our risk settlement colleagues, our experienced team can develop bespoke analyses to inform a variety of approaches to longevity risk reduction.

We also have a range of deterministic mortality stress scenarios, to show the impact on longevity of various possible future developments in areas such as disease treatment, health behaviours, and climate.

For more information on the Demographic Horizons™ stochastic mortality model, please contact the Demographic Horizons™ team.