The impact of mortality shocks on modelling and insurance valuation as exemplified by COVID-19

Simon Schnürch*, Torsten Kleinow, Ralf Korn, Andreas Wagner

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)
26 Downloads (Pure)


The COVID-19 pandemic interrupts the relatively steady trend of improving longevity observed in many countries over the last decades. We claim that this needs to be addressed explicitly in many mortality modelling applications, for example, in the life insurance industry. To support this position, we provide a descriptive analysis of the mortality development of several countries up to and including the year 2020. Furthermore, we perform an empirical and theoretical investigation of the impact a mortality jump has on the parameters, forecasts and implied present values of the popular Lee–Carter mortality model. We find that COVID-19 has resulted in substantial mortality shocks in many countries. We show that such shocks have a large impact on point and interval forecasts of death rates and, consequently, on the valuation of mortality-related insurance products. We obtain similar findings under the Cairns–Blake–Dowd mortality model, which demonstrates that the effects caused by COVID-19 show up in a variety of models. Finally, we provide an overview of approaches to handle extreme mortality events such as the COVID-19 pandemic in mortality modelling.

Original languageEnglish
Pages (from-to)498-526
Number of pages29
JournalAnnals of Actuarial Science
Issue number3
Early online date10 May 2022
Publication statusPublished - Nov 2022


  • COVID-19
  • Lee–Carter model
  • Mortality forecasting
  • Mortality modelling
  • Mortality shocks

ASJC Scopus subject areas

  • Statistics and Probability
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty


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