Risk Management Solutions (RMS) has conducted a mortality risk analysis of the Dutch population, incorporating estimates of lifestyle trend changes, medical advances and future health care environments specific to the Netherlands.

Previous longevity models for the Netherlands have struggled to incorporate future developments in medical science into mortality improvement projections, and RMS therefore used ‘cause of improvement’ modelling for probabilistic longevity scenario generation.

The Netherlands has experienced major improvements in mortality rates over the past decade, with up to four per cent annual improvement rates across retired ages. While smoking rates are higher than in other European countries, there are fewer deaths from cardiovascular disease.

The country also has lower obesity levels, higher standards of health care, and a marked birth cohort effect around the birth year of 1936, some six years later than the similar cohort effect in the United Kingdom, RMS said.

Uncertainty around future life expectancy leads to difficulty for pension funds, annuity providers and insurers who would like to transfer longevity risk to the capital markets, but investors are reluctant to accept the major uncertainties inherent in longevity risk.

Demand for longevity protection increased after liabilities of Dutch pension funds rose as a result of a major revision of actuarial tables by the Dutch Actuarial Society in 2010, reflecting the increasing levels of mortality improvements.

Traditional approaches to longevity risk involve extrapolation of historical mortality rate volatility out into the future. But the RMS model begins with current mortality levels and trends, and then explores scenarios for future trends in the different causes of mortality improvement, incorporating likely timelines for medical developments that are currently in the lab or new drugs at different stages of approval processes.

The Dutch longevity risk model is RMS’ sixth one, after earlier having developed models for the UK, the US, Canada, France and Germany.

“There are very interesting, different local market conditions for the variation in longevity risk from country to country,” said Andrew Coburn, senior vice president of LifeRisks at RMS. “Demographics, social structures, and lifestyle patterns are very different in each country, and the national health care systems result in some very different health outcomes for local populations. These need careful adaptation to model life expectancy projections in each territory.”

Share Story: