Projection table AG2018
Life expectancy has increased steadily in The Netherlands over the past 50 years. This trend has had a considerable impact on society. It is important for pension funds and life insurers to have a continuous insight into this development, if they are to keep promises made.
The Royal Dutch Actuarial Association (Koninklijk Actuarieel Genootschap or ‘AG’) considers it its role to provide the financial sector with an opinion with regard to these developments with the aid of Projections tables. The latest Projections Life Table AG2018 is based on the same model that the Projections Life Table AG2016 was based upon. It is a fully transparent model with a limited number of parameters, making it easy to explain and exactly reproducible. This complies with AG’s aim to make knowledge available to and applicable by the financial sector.
In this publication the AG Mortality Research Committee (Commissie Sterfte Onderzoek or ‘CSO’) describes the development and the outcomes of the Projections Life Table AG2018.
The most important features of the Projections Life Table AG2018 are:
- It is based on a stochastic model, enabling pension funds and life insurers to also estimate the uncertainty around the forecast. This is essential in pricing financial derivatives and in setting buffers to be held in connection with mortality uncertainty.
- In addition to historical mortality in The Netherlands, Projections Life Table AG2018 also uses mortality data from selected European countries with similar prosperity levels. This combination of data leads to a stable model less sensitive to random aberrations in the Dutch data for any one year.
- Projections Life Table AG2018 can be used to estimate mortality levels far into the future. Expected future developments in mortality can be factored into calculations of life expectancy and provisions.
The model specifications being unchanged, the changes of Projections Life Table AG2018 as compared to Projections Life Table AG2016 are caused solely by the addition of new mortality data from The Netherlands and Europe. Most notably for higher age groups, the past two years have shown higher mortality than expected based on Projections Life Table AG2016. This explains the drop in the expected life expectancy increase based on AG2018 in comparison with AG2016.