Mortality fluctuations modelling with a shared frailty approach

Lifetimes within a population can exhibit dependencies due to the common effect of unobservable risk factors. This paper proposes a shared frailty model for stochastic lifetimes dependence in the context of the Gompertz model and examines the effect on non-linear risk measures

The past few years have seen significant development of life insurance risk transfer activities. The issued notional of life insurance risk securitisations has grown exponentially from $1.8 billion in 2001 to $15 billion in 2007. With capital markets investors looking for risk diversification, activities like life settlements have proliferated hugely. The life reinsurance market has significantly increased between 1990 and 2000. In 1993, only 15% of US life insurance business was reinsured. In