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The Actuary The magazine of the Institute & Faculty of Actuaries

Research alternative to an SA subject

One of the policy objectives of the Actuarial Profession is to equip actuaries to move into a broader range of roles. To facilitate this and to help students progress towards becoming a fellow, they may undertake some original research as an alternative to one of the specialist applications subjects. Oliver Lockwood has just qualified as a fellow on completion of his dissertation for subject SA0 — research dissertation specialist applications. He is the second person to complete SA0. The following is an abstract from Oliver’s dissertation:

“The Continuous Mortality Investigation (CMI) of the Institute and Faculty of Actuaries has for a number of years based its graduated tables of assured life, annuitant and pensioner mortality on Gompertz-Makeham formulae. In this thesis, we consider two-dimensional data sets consisting of the number of deaths and the exposed to risk at a range of ages in a range of calendar years.

“Having fitted a Gompertz-Makeham model to the data for each calendar year, we fit univariate time series models to represent the behaviour over time of the Gompertz-Makeham parameters. Cohort effects are allowed for by applying a multiplicative factor depending on year of birth to the fitted force of mortality. Prediction intervals for the future parameters of the model are calculated. Sample values of immediate and deferred annuities are presented, based on stochastic mortality simulations and a deterministic interest rate. An application to risk-based capital calculations, under the Individual Capital Assessment (ICA) regime of the Financial Services Authority (FSA), is presented.”

The full dissertation can be found on the website at www.actuaries.org.uk/knowledge/publications/fellowship_sa0