Facing up to uncertain life expectancy: the longevity fan charts

Area of Science:

• Demography
• Actuarial Science
• Biostatistics

Background:

• Accurate life expectancy projections are crucial for financial planning and public health.
• Traditional projections often fail to adequately capture the uncertainty inherent in future mortality trends.

Purpose of the Study:

• To introduce and demonstrate the utility of longevity fan charts for visualizing life expectancy projection uncertainty.
• To explore how model parameter uncertainty impacts life expectancy forecasts.
• To illustrate the application of these charts in stress-testing longevity outcomes.

Main Methods:

• Development and application of a mortality model calibrated using historical mortality data for English and Welsh males.
• Construction of longevity fan charts to depict projected life expectancy trends and associated uncertainty ranges.
• Analysis of how uncertainty in model parameters influences the width and scope of the fan charts.

Main Results:

• Longevity fan charts reveal strong upward trends in future life expectancy.
• The width of the fan charts, representing uncertainty, increases significantly with longer forecast horizons.
• Incorporating uncertainty in model parameter values further amplifies the projected uncertainty in life expectancy.

Conclusions:

• Longevity fan charts provide a robust visual tool for understanding and communicating uncertainty in life expectancy projections.
• These charts are valuable for stress-testing longevity assumptions in financial and actuarial modeling.
• The methodology highlights the growing uncertainty in long-term mortality forecasts, necessitating careful consideration in planning.