The Research On The Longevity Risk Of China

With the improvement of productivity, human society has rapidly developed. As theincrease in economy and health, human living conditions have greatly improved. Thatmeans the decline in death rates and prolong in average life expectancy. So many countries,including China, have entered into an aging society. The world’s average life expectancyhas increased from45.9in1995to65.4in2000, and it is expected to reach74.3by2050.The sixth census in China shows that the population average life expectancy in China hasincreased to74.83. The increasing old people and actual lifetime result in population aging.The pension payment system faces huge impact and longevity risk arises.This paper mainly studies the group longevity risk that is due to the mortality declineand actual lifetime is longer than expectancy, then pension providers need to extend thepayment period that causes great pressure to pension payment. Due to longevity riskcannot be dispersed internally and the adverse selection, pension provides can only passiveto accept longevity risk. If we don’t take control measures, the whole society securitysystem will be affected. There has been a huge pension gap in China, since transformationof endowment insurance system. Longevity risk makes the pension management muchmore difficult. Therefore study of longevity risk in our country has important practicalsignificance for China’s longevity risk management.With further understanding of longevity risk, domestic and foreign scholars havecarried on comprehensive analysis from identification and management of longevity risk.Identification of longevity risk focuses on mortality prediction; management of longevityrisk focuses on risk securitization. Compared with foreign scholars study of longevity riskstarted late in China and the research is relatively shallow. By the influence of imperfectcapital market, some method to transfer longevity risk through capital market is confinedto theoretical study. And many people don’t have clear cognition on longevity risk. Thispaper makes the systematical analysis on the longevity risk in our country to find a clearline for longevity risk management. We put forward the measures for the longevity riskmanagement that conform to the actual situation in China.This paper is divided into five parts:Chapter one is introduction. It mainly introduces the background and significance of this paper; briefly summarizes the main research contents of this paper; summarizes theresearch both domestic and overseas; shows the research methods in this paper.The second chapter is the theoretical part. It introduces the concept of longevity riskin detail; the causes of longevity risk from the aspects such as society, economy, and socialsecurity system; the impact to individuals, endowment insurance and commercialinsurance.The third chapter is the model introduction. It introduces the development process ofmortality prediction model, the form and parameter estimation method of Lee-Cartermodel. In addition, it illustrates the compilation method of life table. It introduces thetheory for the prediction of mortality and life expectancy.The fourth chapter is the empirical part. This chapter forecasts China’s mortality rateand life expectancy for2012-2020, based on the previous mortality data of differentgenders and ages. It also analyzes the prediction results.The fifth chapter is policy recommendations. According to the empirical analysis oflongevity risk, this chapter puts forward the policy suggestions on reasonable longevityrisk management that combines with endowment insurance system and development ofinsurance market in China.Combining the social insurance with commercial insurance, this paper analyzes the causeof longevity risk in our country comprehensively and points out that the fundamental causeof longevity risk is endowment insurance system lags behind the present situation ofpopulation ageing. Accordingly it puts forward the specific measures for endowmentinsurance system reform to control longevity risk. Based on the latest mortality experiencedata, it predicted the population mortality and life expectancy in the future. And it comes tothe conclusion that our country faces huge longevity risk by contrasting with the using lifetable and months to draw pension in individual account.