actuarial science assignment help

actuarial science assignment help

The Importance of Actuarial Science in Risk Management

1. Introduction to Actuarial Science

The duties of an actuary vary according to the needs of the employer or principal. An actuary, sometimes an appointed actuary, performs a number of services with respect to matters of financial statement and actuarial opinion. The functions of actuaries as regards actuarial reports are extremely important, not only as regards the law but also economic-financial information and, ultimately, the technical-actuarial framework. Three of the generally acknowledged functions or tasks of the actuary are related to the calculation of insurance activity quotas: the amount of technical reserves of life insurance companies after the third year of the insurance; the appraisal of periodic actuarial life and contingency provisions; and the determination of resignations, inoperative, impairment and annulation rates in the contract-year market. In the same vein, the actuarial life and contingency proviso is a virtually peculiar task of the actuary. The actuarial life and contingency reports made by the actuary are extremely vital issues that both interested and financially involved parties are deeply committed to.

The basic objective of actuarial science is to analyze the economic implications of uncertain future events. To do this, actuaries use a variety of mathematical techniques to analyze past data, construct models of future data, make inferences about future data, or evaluate decisions under risky uncertain circumstances. No other profession applies this basic combination of knowledge and skills drawn from a variety of fields. This makes the actuary a truly unique professional. Whether working for a life or general insurance company, a consulting firm, a government agency, or a bank, the actuary can rely on the same core knowledge and skills. The economics of insurance and the economic role of the actuary are of great interest to both economists and actuarial professionals.

2. Key Concepts and Methods in Actuarial Science

A loss distribution gives the probabilities of (annual) claims falling into the various claim amounts. A loss distribution is a characterization that helps identify the magnitude of the exposure to risk and take suitable precautions. It should be based on sound actuarial studies built on reliable claim and exposure data. Although the loss distribution is based on the frequency and amount of future claims, actual claims statistics are rarely available for future risks, so the insurer normally uses data from the past or potentially similar risks. These empirical data can be classified into two categories. First, the insurer may consider the loss history for its own claims data that are plotted and ranked to represent the claim distribution. This actuarial theory is known as Empirical Loss Distribution. Second, the insurer may collect data from other similar groups and the resulting actuarial theory is then known as Published Loss Studies, a database that includes shares of losses from the full insurance market in a specific line of business.

2.1 Loss Distributions

The simplest and most meaningful measure of risk, especially from an actuarial perspective, is variability. In the case of an insurer, the potential for high claim payments is the source of uncertainty, and the primary goal is the stability of the insurer’s future financial condition. This desire for financial stability corresponds to a strong desire for the claim payments to be low and subject to minimal variation from an insurer’s perspective. The mathematical discipline that standardizes the investigation and solves that problem is a branch of probability and statistics, known as actuarial science. The following section focuses on several important actuarial theories that are most widely used for risk management purposes.

3. Applications of Actuarial Science in Various Industries

Moreover, the actuarial projections and cash flow valuation are notable in academic studies of corporate health, as well as it helps in the estimation and management of risks of natural or man-made uncertainty risks, and establish the natural and man-made consequences of exposure to these risks. Accordingly, actuaries work for both industries, man and governments, and agencies regulatory oversight of the profession. Furthermore, the concept about systems which generate data sets and results related by the different domain application used in science, and the understanding of real-life problems in the domain requires interaction between the data and the solution. Finally, this paper also provides the methods, tools, and approaches to providing and supporting the training of future actuaries and professionals in postgraduate programs in actuarial science.

Actuarial science is employed in a variety of fields to solve real business or social problems. Actuaries are professionals who help prepare for financial uncertain events, especially quantitative models and analysis to solve issues in business and government. Actuarial science includes the study of knowledge and skills that are required to apply those measures in areas such as life, health, medical, automobile, workers’ compensation, and pension actuaries. It also solves additional issues, including valuation of government programs such as Social Security and Medicare and implementing financial regulation of insurance.

4. Challenges and Future Trends in Actuarial Science

These statistics have the effect of depreciating the well-recognized political phenomenon that risky decisions are made today while the actuarially required information will be received only in the future. A private sector occupational pension fund can collapse if actuarial insights are not pursued or are ignored. There are many other problems to which actuarial science can fruitfully be applied, for example, pensions in pay-as-you-go systems, the pricing of general insurance, such as home and motor-vehicle insurance, the assessment of insurance company solvency, and the design of social security systems. It is often the regulatory environment that substantially affects the pricing and risk management strategies decided upon by market participants, and the task is trying to estimate the characteristics of what is being regulated.

The traditional role of actuarial science was to provide mortality records from which life insurance premiums were calculated. In the life insurance world, a measure of modus vivendi of individuals not available from any other source was reported to insurance companies through mortality statistics revealed by actuarial science during the nineteenth century. It was based on these mortality records that life insurance premiums were segregated by age, gender, and duration, with those of young males being clearly the most expensive. Other market players, primarily government, are also heavily engaged in matters directly related to actuarial. The Social Security system is, by far, the largest provider of pensions in the world.