Blog posts

Mortality rates are one of the most critical assumptions in life insurance. Actuaries often rely on the mortality rates published by Statistics Offices. Typically, these rates are provided on a yearly basis. However, actuarial cash flow models operate on a monthly scale. In this post, we will explore two common methods for transforming yearly rates into monthly ones: the constant rate and uniform distribution of deaths.

List of content:

1. Transformation methods
2. Practical applications
• Constant rate
• Uniform distribution of deaths

Transformation methods

When it comes to transforming yearly mortality rates into monthly ones, actuaries commonly employ two methods:

• Constant Rate

The …

Runtime is an important aspect of actuarial cash flow models. With the tight reporting deadlines, actuaries are keen to have results as fast as possible. In this post, we will discuss how to measure and improve the runtime of actuarial cash flow models.

List of content:

1. How to improve speed of model?
• Multiprocessing
• Indexing assumptions
• CSV reader
• Maximal calculation period
• Fit formulas
2. How to measure runtime?

How to improve speed of model?

Firstly, we will discuss how to improve the speed of the actuarial cash flow models. In particular, we will discuss the following aspects:

• multiprocessing,
• indexing assumptions,
• maximal calculation …

Actuarial cash flow models predict the future. During development, actuaries need to decide on the projection horizon of the cash flow model.

In this post, we will discuss how to decide on the horizon and how to set it up in the model's settings.

List of content:

1. Maximal calculation period (T_MAX_CALCULATION)
2. Maximal output period (T_MAX_OUTPUT)

While deciding on the projection horizon, it's worth taking into consideration two aspects:

• precision - the longer the projection horizon, the higher the precision of the results,
• runtime - the shorter the projection horizon, the faster the model.

Let's see how the maximal calculation period …

Model points are one of the the actuarial cash flow model's inputs. In this post, we will discuss what model points are and how to set them up.

List of content:

1. What are model points?
2. Working with model points
• Define model point set
• Read data from model point

What are model points?

In short, a model point represents an object for which the actuarial cash flow model will be evaluated.

If you model life insurance, model points may be policy data which contain information on policyholders (age, sum insured, fund value etc.). If you model assets, model points can include …

Do you work in an insurance company? You may come across the term shadow model in the context of actuarial reporting.

What's hidden in this mysterious term?

Actuarial cash flow models are usually complex. Actuaries develop them in commercial software or with programming languages.

It's not easy to review these models, especially for actuaries who are less technical. The validators also struggle to audit them due to their complexity.

That's why it's common to create a shadow cash flow model in an easier environment such as in a spreadsheet. The shadow model replicates the full model results. The shadow model …