The Continuous Mortality Investigation (CMI) is proposing significant structural changes to the next annual update of the CMI Mortality Projections Model, CMI_2024, due for release in Q2 2025.
For the core version of the model, those changes would lead to cohort life expectancies at age 65 that are about five weeks higher for males and about one week lower for females than in the current version of the CMI Model, CMI_2023.
The CMI Model, used by pension schemes, insurers and reinsurers, both in the UK and internationally, is needed to make assumptions about future mortality rates.
The first proposed change is to explicitly model the impact of the pandemic on mortality:
The CMI previously dealt with the exceptional mortality experience in 2020 and 2021 by excluding those years when calibrating the CMI Model and fitting a smooth trend to other years.
It now says those years seemed likely to be outliers and not indicative of the future path of mortality.
It added that while this worked well in the early stages of the pandemic, five years on, a better approach is possible now that there is a clearer picture of how mortality has developed.
Under the proposal, the CMI Model would include an explicit mortality shock in 2020 with the impact reducing in each successive year.
The second change would allow the model to adapt better to situations where different trends in mortality emerge at different ages:
The structure of the current version of the model, CMI_2023, leads to similar changes in mortality trends over time at all ages. However, this has not been seen in practice in recent years.
Mortality in 2024 for ages 75-100 was lower than in any other year, but mortality in 2024 for ages 20-44 was materially higher than before the pandemic.
Updating the structure of the CMI Model to allow for different changes in trends at young, middle, and old ages better reflects recent experience.
The CMI said it is seeking views from its subscribers, with a consultation open until 25 March 2025. It aims to provide an update on its plans for CMI_2024 in April.
Cobus Daneel, chairman of the CMI Mortality Projections Committee, (pictured) said: “The Covid-19 pandemic was challenging for all mortality projection models.
“It was uncertain how mortality rates would react beyond the initial shock and the CMI took a pragmatic approach, avoiding material revisions in projected life expectancies until a clearer picture emerged.
“We excluded data from the peak of the pandemic, as these rates were unlikely to be a good guide to the future, and smoothed through data for other years, focussing on a plausible level of mortality rates in the medium term.
“That approach worked well initially, but required subjective judgements regarding how much emphasis should be placed on recent data.
“Now that mortality at pensioner ages is closer to pre-pandemic levels, we have an opportunity to improve the CMI Model, providing a better fit to recent data across the full age range during and after the pandemic.
“We recognise that different users of the model have different views. The CMI Model provides a framework for them to adjust parameters to reflect their own portfolios and views on the impact of the pandemic, and to communicate those to others.”