Longevity risk management through Machine Learning: state of the art

  • Received October 16, 2020;
    Accepted November 16, 2020;
    Published November 25, 2020
  • Author(s)
  • DOI
  • Article Info
    Volume 11 2020, Issue #1, pp. 11-20
  • Cited by
    4 articles

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This work is licensed under a Creative Commons Attribution 4.0 International License

Longevity risk management is an area of the life insurance business where the use of Artificial Intelligence is still underdeveloped. The paper retraces the main results of the recent actuarial literature on the topic to draw attention to the potential of Machine Learning in predicting mortality and consequently improving the longevity risk quantification and management, with practical implication on the pricing of life products with long-term duration and lifelong guaranteed options embedded in pension contracts or health insurance products. The application of AI methodologies to mortality forecasts improves both fitting and forecasting of the models traditionally used. In particular, the paper presents the Classification and the Regression Tree framework and the Neural Network algorithm applied to mortality data. The literature results are discussed, focusing on the forecasting performance of the Machine Learning techniques concerning the classical model. Finally, a reflection on both the great potentials of using Machine Learning in longevity management and its drawbacks is offered.

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    • Conceptualization
      Susanna Levantesi, Gabriella Piscopo
    • Methodology
      Susanna Levantesi, Andrea Nigri
    • Supervision
      Susanna Levantesi, Gabriella Piscopo
    • Writing – review & editing
      Susanna Levantesi, Gabriella Piscopo
    • Investigation
      Andrea Nigri
    • Visualization
      Andrea Nigri
    • Writing – original draft
      Andrea Nigri, Gabriella Piscopo