4 INTRODUCTION PROJECTIONS LIFE TABLE AG2020 Through the publication of Projections Life Table AG2020, AG presents an assessment of the expected development of survival rates and life expectancy in the Netherlands. This assessment is based on the most recent mortality data from The Netherlands and from European countries of similar prosperity. The result is a forecast of mortality probabilities by age for each future year for men and women. This introduction describes why the forecast is made, how the model works and what activities were performed since the release of Projections Life Table AG2018. 4.1 Why does AG develop a projection model for mortality probabilities? Every two years AG publishes a projection model to forecast the development of mortality rates in the Dutch population. This model is relevant to, among others, pension funds and life insurance companies. The projection model can be used for the determination of the provisions held by pension funds and insurers, taking into account fund or portfolio specific mortality experience if desired. Pension benefits, in general, are paid as long as a participant or insured person lives and therefore it is important to know how long this person is expected to survive. AG combines expertise from science and the pensions and insurance industry to develop this mortality forecast. The AG model is fully transparent and only uses publicly available data. Based on the model documentation and the data used, the model can be copied and its results reproduced. AG has developed this model for the whole industry and it therefore contributes to market uniformity. 4.2 How does the model work? The projections are based on a stochastic model. This makes it possible to give an impression of the uncertainty in the development of life expectancy. The model estimates parameters that best describe the historical development of European mortality in countries with a prosperity level similar to that of the Netherlands. Based on these parameters a forward projection can be made for these countries. The size of the dataset makes this projection stable. In addition, parameters are estimated that describe the historical aberration between mortality in The Netherlands and these European countries. From 1970 onwards a decreasing difference in mortality probabilities between European countries is clearly discernible. Also, the development of period life expectancy has shown a similar upward trend for decades. See graphs 5.1 and 5.2 in chapter 5. Projections Life Table AG2020 Introduction Projections Life Table AG2020 12
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