7 UNCERTAINTY Following the publication of Projection Table AG2014, a number of interested parties in the sector posed the question whether the (stochastic) uncertainty resulting from that model was not too small. The Mortality Research Committee asked a number of experts explicitly for their views regarding the uncertainty in the model used. This did not result in proposals for adjustments to the model on the basis of explicit quantifiable scenarios, about which there was consensus amongst experts and which could be estimated using publicly available data. For this reason, the structure of the model has not changed. We have stated below precisely which uncertainty the model includes and which it does not include. 7.1 Extrapolation from the past In essence, the model used extrapolates not only mortality developments, but also the variability (volatility) of these. In other words, the mortality projections are based on the assumption that observed developments in the past, on average, will continue into the future. In the same way, the model also extrapolates the volatility in the development of mortality in the past. In other words, just as the parameters for the trend are estimated on the basis of observed developments in the past, so the same applies to the volatility parameters. In doing so, the AG2016 model, like the AG2014 model, gives an insight into the degree of volatility, as observed in the past in the development of mortality. Conceptually, of course, it is possible that the trend will be broken in 2017, which will cause this volatility to increase or fall. It is also possible for the trend to change permanently. In the projection, the Committee has opted to assume that a trend break such as this will not occur. A trend break such as this does not appear to have occurred during the past 40 years amongst the European population considered. The many positive medical developments and improvements in nutrition and lifestyles appear to have had a major, but gradual, impact. 7.2 No parameter and model uncertainty It is important to note that the uncertainty intervals presented in this publication do not take into account uncertainty in relation to parameters or the model. In other words, these intervals take the chosen model and the estimated parameters as the point of departure. The future deviations of the best estimate may be larger or smaller because mortality trends may occur which now cannot be foreseen, for instance due to exceptional medical and socio-economic developments. These developments may result in a future spread of mortality around the best estimate which may be different to the model-based spread calculated on the basis of historic data. Projection Table AG2016 Uncertainty 17
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