Analysing Mortality Trends and Modeling Mortality in Kenya Using Cairns-blake-dowd Model.

Abstract

The project focuses on mortality trends in Kenya and its implications for longevity risk in the life insurance industry within the ever-rising life expectancy. Based on data from 1980 to 2023, it makes uses of the Cairns-Blake-Dowd (CBD) mortality model to estimate the parameters using Ordinary Least Squares (OLS). These mortality indices κ(1) and κ(2) are modeled by a bivariate random walk with drift in order to project future mortality. The benefit of this is that it captures age-specific patterns in mortality and emphasizes improvements that occur across different age groups. Key findings indicate the general decline in mortality rates, reflecting better health outcomes and increased life expectancy. Such trends underline the increasing relevance of longevity risk to the life insurance industry. Although this study does not model the longevity risk, it discusses the financial consequences that come with the improvement of mortality rates, underlining the necessity for insurers to adapt pricing, reserves, and risk management strategies in order to stay resistant to demographic changes. The analysis of mortality rates and their trends provides critical information to both policymakers and life insurers in Kenya. The results establish a framework within which the interaction between mortality improvements and longevity risk can be understood and leaned on in pursuit of sustainable strategies responding to demographic changes. Further research might be directed at modeling directly the longevity risk and therefore exploring advanced forecasting techniques to make life insurance decision-making better.