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European Actuarial Journal
Published in: European Actuarial Journal 1/2023

27-06-2022 | Original Research Paper

Smooth projection of mortality improvement rates: a Bayesian two-dimensional spline approach

Authors: Xiaobai Zhu, Kenneth Q. Zhou

Published in: European Actuarial Journal | Issue 1/2023

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Abstract

This paper proposes a spline mortality model for generating smooth projections of mortality improvement rates. In particular, we follow the two-dimensional cubic B-spline approach developed by Currie et al. (Stat Model 4(4):279–298, 2004), and adopt the Bayesian estimation and LASSO penalty to overcome the limitations of spline models in forecasting mortality rates. The resulting Bayesian spline model not only provides measures of stochastic and parameter uncertainties, but also allows external opinions on future mortality to be consistently incorporated. The mortality improvement rates projected by the proposed model are smoothly transitioned from the historical values with short-term trends shown in recent observations to the long-term terminal rates suggested by external opinions. Our technical work is complemented by numerical illustrations that use real mortality data and external rates to showcase the features of the proposed model.
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Metadata
Title
Smooth projection of mortality improvement rates: a Bayesian two-dimensional spline approach
Authors
Xiaobai Zhu
Kenneth Q. Zhou
Publication date
27-06-2022
Publisher
Springer Berlin Heidelberg
Published in
European Actuarial Journal / Issue 1/2023
Print ISSN: 2190-9733
Electronic ISSN: 2190-9741
DOI
https://doi.org/10.1007/s13385-022-00323-3

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