Mortality risk

Mortality risk is losing money because insureds die in greater numbers, or sooner, than the pricing assumed, on contracts where death triggers a benefit, such as death cover and protection insurance. It is the mirror of longevity risk, which concerns conversely longer survival than expected on annuities. Mortality risk has a level component, the lasting gap between observed and priced mortality, a trend component, the structural evolution of mortality, and a catastrophe component, an abrupt excess mortality linked to a pandemic, disaster or extreme event. The pandemic was a reminder of the materiality of catastrophe mortality risk for life insurers and reinsurers. To manage this risk, insurers resort to reinsurance, diversification, and capital-market transfer instruments such as mortality bonds. Modeling relies on tables and biometric assumptions, whose quality determines the adequacy of pricing.