Actuarial Learning for Pension Fund Mortality Forecasting

For the assessment of the financial soundness of a pension fund, it is necessary to take into account mortality forecasting so that longevity risk is consistently incorporated into future cash flows. In this article, we employ machine learning models applied to actuarial science ({\it actuarial learning}) to make mortality predictions for a relevant sample of pension funds' participants. Actuarial learning represents an emerging field that involves the application of machine learning (ML) and artificial intelligence (AI) techniques in actuarial science. This encompasses the use of algorithms and computational models to analyze large sets of actuarial data, such as regression trees, random forest, boosting, XGBoost, CatBoost, and neural networks (eg. FNN, LSTM, and MHA). Our results indicate that some ML/AI algorithms present competitive out-of-sample performance when compared to the classical Lee-Carter model. This may indicate interesting alternatives for consistent liability evaluation and effective pension fund risk management.

Conformal prediction of circular data

Split conformal prediction techniques are applied to regression problems with circular responses by introducing a suitable conformity score, leading to prediction sets with adaptive arc length and finite-sample coverage guarantees for any circular predictive model under exchangeable data. Leveraging the high performance of existing predictive models designed for linear responses, we analyze a general projection procedure that converts any linear response regression model into one suitable for circular responses. When random forests serve as basis models in this projection procedure, we harness the out-of-bag dynamics to eliminate the necessity for a separate calibration sample in the construction of prediction sets. For synthetic and real datasets the resulting projected random forests model produces more efficient out-of-bag conformal prediction sets, with shorter median arc length, when compared to the split conformal prediction sets generated by two existing alternative models.

Conformal prediction for frequency-severity modeling

We present a nonparametric model-agnostic framework for building prediction intervals of insurance claims, with finite sample statistical guarantees, extending the technique of split conformal prediction to the domain of two-stage frequency-severity modeling. The effectiveness of the framework is showcased with simulated and real datasets. When the underlying severity model is a random forest, we extend the two-stage split conformal prediction procedure, showing how the out-of-bag mechanism can be leveraged to eliminate the need for a calibration set and to enable the production of prediction intervals with adaptive width.