Significant increases in life expectancies would increase annuity costs and would require additional reserves to fund contracts now in benefit. It is important that such plans continue to be soundly funded so that future obligations can be met. The objective of this research is to determine the size of these increases and how much strain the companies will experience and how well equipped they are to meet this strain. The research plan consists of the following steps: (1) identify companies interested in providing data on current annuities in benefit; (2) secure their data in machinable form; (3) determine that these populations, taken together, represent a valid sample of the U.S. annuity contracts in benefit; (4) using the cohort method, determine on at least two mortality assumptions the needed increases in reserves; (5) determine how much strain these additional reserves would place on the surplus of the contributing companies; (6) determine how well equipped they are to meet this strain; and (7) determine the legal ramifications of the required reserve strengthening.Awardee's statement of the potential commercial applications of the research:Life insurance companies and consulting actuaries deal with these quantities on the basis of fixed mortality tables. They do not normally have the demographic skills to deal with such concepts on a realistic basis (i.e., the cohort method) when life expectancies are changing significantly.National Institute on Alcohol Abuse and Alcoholism (NIAAA)
