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Prescribed Mortality Improvement Rates for Canadian Valuation (2017) (December, 2018)

Article Summary:

This article provides guidance for modelling the Canadian Institute of Actuaries (CIA) recent prescribed mortality improvement rates and margins in AXIS. It also provides examples in the attached AXIS dataset.


CIA Research Paper and Standards of Practice

In 2017, the CIA promulgated a new prescribed best estimate mortality improvement rates table (a.k.a. [MI-2017]) and the associated Margin for Adverse Deviations. The prescribed mortality improvement rates are referenced by the Standards of Practice for the Valuation of Insurance Contract Liabilities: Life and Health (Accident and Sickness) Insurance [Subsection 2350]. The promulgation was effective on October 30, 2017.

Model Prescribed Rates in AXIS

AXIS has been enhanced to support modelling the updated best estimate mortality improvement rates and the associated MfADs.

Best Estimate Mortality Improvement Rates

The base mortality improvement rates can be downloaded from the CIA website (Link to [MI-2017]). The annual base mortality improvement rates vary by Attained ages and by Calendar Year.

In AXIS, this two-dimensional mortality improvement structure can be modelled in the Mortality Improvement (Attained Age by Financial Year) table. The table is available in the "Mort Improvement" field in each Actuarial Assumptions Set (i.e. Go to Actuarial Assumptions Set => Mortality Section => Mort Improvement).

The help text of the Mortality Improvement (Attained Age by Financial Year) table describes how mortality rates are calculated by applying the mortality improvement using this table. Knowledge Base Article 1602 explains the mortality projection basis options within the table in detail.

Margin for Adverse Deviations (MfADs)

The prescribed mortality improvement margins vary by attained age. To determine the minimum valuation assumption, the margins are deduced from or added to the base mortality improvement rates [MI-2017], depending on which way would produce higher insurance contract liabilities at an appropriate aggregation level.

In AXIS, the mortality improvement MfADs can be modelled in the Mortality Impr. Adj. (add) table. The table can be selected in the "Mort improve margin" field in each "Reserve with margins" type of Actuarial Assumptions Set (i.e. Go to a "Reserve with margins type" Actuarial Assumptions Set => Mortality Section => Margins => Mort improve margin).

The help text of the Mortality Impr. Adj. (add) table explains how margins are applied to the base mortality improvement rates in this table. Each column of the table is used to enter the margin for one attained age. With positive inputs, the margins will be added to the best estimate rates; whereas with negative inputs, the margins will be deducted from the best estimate rates.

The AXIS dataset attached provides examples of modelling the prescribed mortality improvement rates and MfADs in the Regular Life, Par Products, Universal Life and Annuity modules.

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