The author considers multiple decrement models and their applications in insurance and pension planning.
In multiple decrement models, the termination from given status depends on several random factors. Most often the factors are modeled by two random variables: time to decrement and cause of decrement.
The book is organized in six chapters.
Chapter 1 presents generally the multiple decrement modeling. Chapter 2 discusses calculation of premiums and reserves in life insurance when the benefit depends on the cause of decrement and the time of decrement. Chapter 3 is devoted to the application of multiple decrement models for evaluating the cost of a given pension plan at a specified time. Chapter 4 reviews some actuarial funding methods – techniques for spreading the plan over future years. In Chapter 5, multi-state Markov models are considered. Chapter 6 introduces in brief stochastic models for interest rates and a calculation of premium for some products in this setup.
The highlight of the book is the usage of R software for statistical computations. The command-driven R package brings out very clearly the successive stages of the calculations.