Improving longevity risk management through machine learning

The changes in mortality trends strongly impact on pricing and reserve allocation of life annuities and on the sustainability of social security systems. In 2012, the International Monetary Fund estimated that each additional year of life expectancy added about 3%–4% to the present value of the liabilities of a typical defined benefit pension fund. Recently, Artificial Intelligence (AI) in general and Machine Learning (ML) in particular are appearing on the landscape of actuarial research and practice, albeit belatedly and slowly with respect to other areas such as medicine, industry, finance, and so on. The literature on the mortality modeling with ML is still now very scarce. The choice of a mortality projection model rather than another leads to different actuarial valuations in the pricing and reserving policies. The impact of longevity projections depends on the features of the insurance product involved.