Managing director of research at the Society of Actuaries (SOA), R. Dale Hall, and experience studies actuary Patrick Nolan discuss findings from the mortality improvement scale.
Can you tell us about the latest mortality improvement scale?
Nolan: This past October, we released the annually updated mortality improvement scale for pension plans, MP-2018. This experience study report projects lower future rates of mortality improvement and lower pension plan obligations compared to the previous scale, MP-2017. Scale MP-2018 is the fourth annual update to Scale MP-2014 developed by the Retirement Plans Experience Committee (RPEC).
What are the key changes in the scale and why?
Nolan: Our preliminary estimates suggest updating from Scale MP-2017 to Scale MP-2018 could reduce a plan’s pension obligations by 0.2–0.4 percent for females and 0.3–0.6 percent for males. Those estimates are determined using a 4 percent discount rate.
Assumptions on Policyholder Behavior
in the Tail
The Joint Risk Management Section, in collaboration with the Casualty Actuarial Society (CAS), the Canadian Institute of Actuaries (CIA) and the SOA, released a report on policyholder behavior in the tail (PBITT). The report gathers assumptions used to price, reserve and manage risks of universal life and its secondary guarantees.
Exploring Auto Loss Cost Trends
The CAS, SOA and Property Casualty Insurers Association of America (PCI) jointly released reports on the causes of automotive insurance loss trends, using publicly available data from the Federal Highway Administration, the U.S. Bureau of Labor Statistics and the Census Bureau. These reports focus on two key cost areas: liability and property damage in terms of frequency and severity.
Analyzing Research on Aging
A new series of SOA reports examines financial challenges and perspectives on retirement planning across the millennial, Generation X, late baby boomer, early baby boomer and silent generations. The studies look at financial priorities and difficulties in gaining financial security.
Hall: We are seeing a reduction of overall U.S. mortality improvement trends that began in 2010. It’s important to note that because there is varied mortality improvement across the different age groups, it’s imperative for industry professionals to perform their own calculations. That means experts need to use the corresponding demographics of their pension population to determine the impact of implementing the updated mortality improvement scale for their individual plan.
Nolan: As part of this experience study work, we conducted an assessment of the overall effectiveness of alternative approaches for the projection of future U.S. mortality rates. This study considers three characteristics: stability, forecast accuracy and fit. One particular alternative model is introduced in the Scale MP-2018 report that improves year-over-year stability in pension obligation estimates, but with weaker historical fit.
What other projects on mortality studies are in development?
Hall: As part of the SOA’s strategic research, we are working on longevity research projects to examine the factors that impact models and mortality predictions. Stay tuned for future updates.
Earlier this year, RPEC released an exposure draft of the Pub-2010 Public Retirement Plans Mortality Tables. The primary focus of this study was a comprehensive review of recent mortality experience of public retirement plans in the United States. We’re currently reviewing comments provided on the exposure draft and will be making final updates.
We are also hosting the Living to 100 Symposium in January 2020. This triennial event brings together actuaries, academics, demographers and other experts to discuss mortality and longevity.
Copyright © 2018 by the Society of Actuaries, Schaumburg, Illinois.