A stochastic implementation of the APCI model for mortality projections. (2019)

• Record Type: Journal Article
• Authors: Richards, S. J.; Currie, I. D.; Kleinow, T.; Ritchie, G. P.
• Is Part Of: British actuarial journal. Volume 24(2019)
• Publication Date: 2019
• Subjects: Mortality Projections, -- APC, -- Lee–Carter, -- ARIMA Models, -- Solvency II, -- VaR; Actuarial science -- Periodicals; Insurance, Life -- Periodicals; Periodicals; Periodicals; 368.010941
• DOI: 10.1017/S1357321718000260
• Languages: English
• ISSNs: 1357-3217

Abstract

Abstract: The Age-Period-Cohort-Improvement (APCI) model is a new addition to the canon of mortality forecasting models. It was introduced by Continuous Mortality Investigation as a means of parameterising a deterministic targeting model for forecasting, but this paper shows how it can be implemented as a fully stochastic model. We demonstrate a number of interesting features about the APCI model, including which parameters to smooth and how much better the model fits to the data compared to some other, related models. However, this better fit also sometimes results in higher value-at-risk (VaR)-style capital requirements for insurers, and we explore why this is by looking at the density of the VaR simulations.