Presentation by Noel Harewood - Actuary.com

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A senior settlement is a transaction where ownership of a life insurance policy is sold for an amount greater than the cash value Senior settlements are bundled and sold as investments Typically, buyers do not have an insurable interest in the insured’s life Characteristics of typical senior settlement portfolios are as follows: Lives are aged 65 and older Each life is assessed a mortality rating (e.g., 200% of standard) − Life expectancy is <strong>com</strong>puted based on the base mortality table and the mortality rating Policies are for a relatively high face amount Limited number of policies involved in transaction (50 to 1,000) Reinsurance that pays out the death benefit two years after estimate of life expectancy is frequently utilized Given the limited number of lives and the reinsurance structure, senior settlement portfolios are prime candidates for stochastic mortality analysis 14
We have analyzed a hypothetical senior settlement portfolio Lives ranged in age from 65 to 85 Lives rated from standard to 600% 50 lives in the portfolio Average Life Expectancy (Based on 1,000 Monte Carlo Simulations) Years 11.0 10.5 10.0 9.5 9.0 8.5 8.0 10.6 10.3 9.3 9.4 9.1 Mean Median 75th Percentile 90th Percentile 95th Percentile Note: Life expectancy based on on base mortality of of 100% of of SOA 1990-95 experience table, age last birthday, select and ultimate. Extra mortality was kept level in in durations 5 and later. No mortality improvement was utilized 15
Page 1 and 2: Stochastic Modeling Workshop — Mo
Page 3 and 4: Overview
Page 5 and 6: Stochastic mortality techniques can
Page 7 and 8: Monte Carlo simulation is a common
Page 9 and 10: Stochastic mortality rates can also
Page 11 and 12: There are several practical applica
Page 13: Case Study 1: Senior Settlements
Page 17 and 18: Case Study 2: COLI Reinsurance
Page 19 and 20: Case Study 2: COLI Reinsurance (con
Page 21 and 22: Deterministic mortality projections
Page 23 and 24: Stochastic mortality projections he
Page 25 and 26: Modifying the expected mortality as
Page 27 and 28: Case Study 3: Economic Capital for
Page 29 and 30: Projection of stochastic mortality
Page 31 and 32: Effect of a Mortality Shock on Capi
Page 33: Closing Thoughts Stochastic modeli

Presentation by Noel Harewood - Actuary.com

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