Milliman's Risk and Economic Volatility Evaluation of Annuitant Longevity (REVEAL) software model gives companies and investors a dynamic and sophisticated approach to assessing volatility embedded in pension plans, immediate annuities, and deferred annuities with longevity guarantees (including guaranteed living benefits).
REVEAL uses stochastic techniques to identify volatility in all sources where volatility exists that are not typically reflected in traditional actuarial techniques (e.g., mortality distributions and benefit elections). After determining the underlying mortality assumption, REVEAL performs stochastic economic liability valuations. It illustrates how volatility is likely to interact with different variables and shows how it can affect profits and cash flows over time. REVEAL can analyze a number of different variables.
- Baseline mortality assumptions
- Mortality improvement assumption, reflecting correlations among age groups and gender over user defined periods of time
- Dates of death for participant and spouse (given stochastically determined mortality assumption)
- Cause-of-death reduction scenarios—stress improvements in the following various causes of death (e.g., 1% chance in a given year that death rates from cancer decrease by 25%): infections and parasitic disease; neoplasms; endocrine, nutritional, and metabolic; circulatory disease; respiratory disease; digestive disease; genitourinary disease; external causes; and other causes
- Benefit elections, payment start dates, future salary inflation, and other variables that affect pension cash flows
REVEAL can also deterministically modify underlying mortality rates by causes of death to reflect actual medical breakthroughs and projected medical advancements.
REVEAL can provide insight into an insurer's longevity risk in a range of situations, including:
- The sound pricing of pension liabilities
- An astute navigation of the emerging structured finance market for longevity risk
- A comprehensive understanding of 'tail' risks as part of an enterprise risk management approach.
REVEAL is an ideal solution for insurers, pension plans, hedge funds, or other investors who are analyzing longevity risk. It contains U.S. and U.K. functionality.
Like Milliman's other advanced software tools, REVEAL was created and continues to be supported by our expert team of actuaries, consultants, and software designers who will fully train clients so that they can maximize the value of this powerful risk-management tool.