Modelling Lapse Rates in Life Insurance

Einleitung/Dauer

Accurate modelling of lapse rates in life insurance portfolios is a critical component of actuarial work, underpinning cash flow projections, embedded value calculations, and regulatory frameworks such as IFRS 17 and Solvency II. This talk explores lapse modelling techniques, focusing on their practical use in long-term liability projections.

Preliminary Programme
Thursday, 11 June 2026
10:00-10:15 Introduction and Motivation
10:15-10:30 Key Determinants of Lapse Behaviour, Lapse Rate Hypotheses
10:30-11:30 Selected Lapse Rate Modelling Techniques: Models, Model Selection and Diagnostic, Practical Considerations
11:30-12:00 Case study

All the above times are given in CEST (Central European Summer Time).

Vorgehensweise und Ziele

The purpose of the session is to provide a comprehensive technical overview of methods used to model life insurance lapse and surrender rates, while demonstrating how these approaches integrate with actuarial cash flow models, which support accounting, pricing, risk, and solvency assessments.

Key determinants of lapse behaviour will be discussed, ranging from market-dependent factors such as interest rates, unemployment, and economic cycles to contract-specific influences like product design, policyholder demographics, and distribution channels. The session will also include a review of empirical findings, including competing hypotheses that link lapse rates to interest rate movements or policyholder liquidity needs.

Several modelling concepts will be overviewed. These include traditional segment-based assumptions, statistical approaches such as one-factor models, generalized linear models (GLM) with emphasis on logistic regression, and their extensions. Machine learning approaches such as classification and regression trees, random forests, gradient boosting, and neural networks will also be considered, with attention to their opportunities and constraints in actuarial contexts.

From a technical perspective, the session will focus on Key determinants of lapse behaviour, variable selection, and diagnostic tools, including residual analysis, goodness-of-fit tests, and predictive performance metrics. Backtesting and validation strategies will also be discussed. Finally, the session will address practical aspects of implementation, including deployment in R and/or Python, integration with actuarial systems and its challenges.

Teilnehmer

This web session is intended for participants involved in life insurance cash flow modelling, reporting, and risk assessment, including those working in actuarial, finance, controlling, or risk management roles. It is also relevant for professionals seeking to understand the practical application of lapse rates modelling in the context of long-term liability projections and regulatory frameworks related to life insurance. The session will cover practices for integrating lapse models into actuarial cash flow projections, which support accounting, pricing, risk, and solvency assessments.

Participants are expected to have general actuarial and financial knowledge, as well as a basic understanding of life insurance liability cash flow modelling.

Technical Requirements
Please check with your IT department if your firewall and computer settings support web session participation (the programme Zoom will be used for this online training). Please also make sure to join the web session with a stable internet connection.

Dozierende

Radek Hendrych
is an experienced actuarial specialist providing services to (re)insurance clients in the CEE and US markets, with recent engagements at the consulting company Tools4F. He has more than ten years of experience in both life and non-life insurance, including positions as chief actuary at a mid-sized insurer and senior manager at a Big4 firm. He integrates practical actuarial experience with his academic role as a lecturer and researcher at Charles University in Prague. Radek is a fully qualified actuary with the Czech Society of Actuaries and holds a PhD in Econometrics and Operational Research from Charles University, Prague.

Sprache/Kurztitel

The language of the web session will be English.

CPD Credits
For this web session, the following CPD credits are available under the CPD scheme of the relevant national actuarial association:

• Austria: 2 points
• Belgium:  2 points
• Bulgaria:  3 points
• Croatia: individual accreditation
• Czechia:  2 hours
• Denmark 2 credits
• Estonia:  2 hours
• Finland: 2 points
• France:  12 points
• Germany:  2 hours
• Greece: 3 points
• Hungary:  2 hours
• Iceland: 2 credits
• Ireland: 2 hours
• Italy: individual accreditation
• Latvia: 2 hours
• Lithuania: 2 hours
• Netherlands:  approx. 2 points (individual accreditation)
• Norway: 2 points
• Poland: 2 hours
• Portugal: 2 hours
• Serbia: 2 hours
• Slovakia:  individual accreditation
• Slovenia:  individual accreditation
• Spain: CAC: 2 hours, IAE: 2 hours
• Switzerland:  individual accreditation
• USA: SOA (Section B): up to 2.4 hours

No responsibility is taken for the accuracy of this information.