Dependence may arise in insurance when the insureds are clustered into
groups e.g. joint-life annuities. This dependence may be produced by sharing a
common risk acting on mortality of members of the group. Various dependence
models have been considered in literature; however, the focus has been on either the lower-tail dependence alone or
upper-tail dependence alone. This article implements the frailty dependence
approach to life insurance problems where most applications have been within
medical setting. Our strategy is to use the conditional independence assumption
given an observed association measure in a positive stable frailty approach to
account for both lower and upper-tail dependence. The model is calibrated on
the association of Kenyan insurers 2010 male and female published rates. The
positive stable model is then proposed to construct dependence life-tables and
generate life annuity payment streams in the competitive Kenyan market.
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