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DISCUSSION PAPER PI-1108

Progress in Medicine, Limits to Life and forecasting Mortality

Carlo A. Favero, Marco Giacoletti

In this paper we propose a model to forecast future mortality that includes information on the limits to life and on progress in medicine. We apply the model to forecasting future mortality and survival rates for the males population in England andWales. Our proposal extends the benchmark stochastic mortality model along two dimensions. First, we try and deal explicitly with tail risk in the cross-sectional estimation. by including information about the "limit to life" in the sample used to construct factors for the cross-sectional dimension of
mortality rates. Second, we propose to substitute the usual stochastic trend model adopted for the time series of risk factors with a predictive framework based on available evidence on medical progress and causes of death. The model projects very little variability for limits to life over the next ten years and predicts that in 2020 the probability that an individual age 65 will survive until 85 is 20% with an upper bound of 23% and a lower bound of 17%.

Key words: stochastic mortality, limits to life, medical progress, longevity risk, compression of morbidity, modal age of death