A Poisson log-bilinear regression approach to the construction of projected lifetables

This paper implements Wilmoth's [Computational methods for fitting and extrapolating the Lee-Carter model of mortality change, Technical report, Department of Demography, University of California, Berkeley] and Alho's [North American Actuarial Journal 4 (2000) 91] recommendation for improving the Lee-Carter approach to the forecasting of demographic components. Specifically, the original method is embedded in a Poisson regression model, which is perfectly suited for age-sex-specific mortality rates. This model is fitted for each sex to a set of age-specific Belgian death rates. A time-varying index of mortality is forecasted in an ARIMA framework. These forecasts are used to generate projected age-specific mortality rates, life expectancies and-life annuities net single premiums. Finally, a Brass-type relational model is proposed to adapt the projections to the annuitants population, allowing for estimating the cost of adverse selection in the Belgian whole life annuity market. (C) 2002 Elsevier Science B.V. All rights reserved.