| Abstract: | Recently, the actuarial professions in various countries have adopted an innovative two-dimensional approach to projecting future mortality. In contrast to the conventional approach, the two-dimensional approach permits mortality improvement rates to vary with not only age but also time. Despite being an important breakthrough, the currently used two-dimensional mortality improvement scales are subject to several limitations, most notably a heavy reliance on subjective judgments and a lack of measures of uncertainty. In view of these limitations, in this paper we introduce a new model known as the heat wave model, in which short- and long-term mortality improvements are treated respectively as ‘heat waves’ that taper off over time and ‘background improvements’ that always exist. Using the heat wave model, one can derive two-dimensional mortality improvement scales that entail minimal subjective judgment and include measures of the uncertainty. |
