Actuarial science

Actuarial Science

Actuarial science is a discipline that applies mathematical and statistical methods to assess risk in insurance, finance, and other industries and professions. Actuaries are professionals trained in this discipline. The field is concerned with the construction and analysis of models to evaluate the financial implications of uncertain future events.

History

The origins of actuarial science can be traced back to the 17th century with the development of probability theory and life tables. The first life table was created by John Graunt in 1662, which laid the foundation for the development of life insurance.

Applications

Actuarial science is used in various fields, including:

• Insurance: Actuaries design and price insurance policies, ensuring that premiums are sufficient to cover future claims and expenses.
• Pensions: Actuaries assess the financial health of pension plans and determine the contributions needed to meet future obligations.
• Finance: Actuaries apply their skills to manage financial risks, including investment risks and credit risks.
• Healthcare: Actuaries analyze healthcare costs and design health insurance products.

Methods

Actuarial science employs a variety of mathematical and statistical techniques, including:

• Probability theory: Used to model and predict uncertain events.
• Statistics: Used to analyze historical data and estimate future trends.
• Financial mathematics: Used to assess the value of financial instruments and liabilities.
• Risk theory: Used to evaluate the likelihood and impact of adverse events.

Actuarial Models

Actuarial models are mathematical representations of real-world processes. They are used to predict future events and assess the financial impact of those events. Common models include:

• Life tables: Used to estimate the probability of death at various ages.
• Survival models: Used to analyze the time until an event occurs, such as death or failure.
• Loss distribution models: Used to estimate the distribution of potential losses.

Professional Organizations

Several professional organizations support actuaries and the actuarial profession, including:

• Society of Actuaries (SOA)
• Casualty Actuarial Society (CAS)
• Institute and Faculty of Actuaries (IFoA)
• International Actuarial Association (IAA)

Education and Qualification

Becoming an actuary typically requires a strong background in mathematics, statistics, and finance. Actuaries must pass a series of professional exams to become certified. These exams cover topics such as probability, financial mathematics, and actuarial models.

Related Pages

• Probability theory
• Statistics
• Insurance
• Pension

Gallery

• 

  Excerpt from CDC 2003 Table 1