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The Actuary The magazine of the Institute & Faculty of Actuaries

Epidemics and climate part of new mortality modelling

Researchers have developed a method of forecasting mortality rates that incorporates unusual events such as a bird flu epidemic or extreme weather.

In the latest research, Dr Iain Currie and James Kirkby have introduced events that can alter mortality rates in particular periods, such as disease epidemics — an example of a ‘period shock’ — into mortality models.

In the past, ‘period shocks’ have not been used in modelling, although events such as the Spanish Flu in 1918 made a huge one-off impact on mortality, killing an estimated 20 to 50 million people worldwide. Dr Currie said the new method could be used to measure volatility in mortality forecasts, and the researchers hope it will prove valuable to pension scheme actuaries in modelling and forecasting mortality rates.

Dr Currie said: “Flu epidemics, hot summers or cold winters can disproportionately affect the mortality of certain age groups in particular years. We call such an effect a ‘period shock’.” The work is summarised in a paper entitled Smooth models of mortality with period shocks, which can be viewed at www.ma.hw.ac.uk/˜iain/research/Currie_Shocks.pdf

Dr Currie’s research was supported by a grant from the Profession and carried out at Heriot-Watt University. The work of James Kirkby was supported by an Engineering and Physical Sciences Research Council Studentship and a grant from the Continuous Mortality Investigation (CMI).