What is actuarial science
Actuarial science is a discipline that assesses financial risks in the fields of insurance and finance, using mathematical and statistical methods. Actuarial science applies the mathematics of probability and statistics to define, analyze and resolve the financial implications of uncertain future events. Traditional actuarial science largely revolves around the analysis of mortality and the production of mortality tables and the application of compound interest.
DISTRIBUTING Actuarial science
Actuarial science became a formal mathematical discipline in the late 17th century with the increase in demand for long-term insurance coverage such as burial, life insurance and annuities. Actuarial science covers several interdependent subjects, including mathematics, probability theory, statistics, finance, economics and computer science. Historically, actuarial science has used deterministic models in the construction of tables and premiums. Over the past 30 years, science has undergone revolutionary changes due to the proliferation of high-speed computers and the union of stochastic actuarial models with modern financial theory.
Many colleges and universities offer degrees in actuarial science, which consist of a solid foundation course in math, statistics and economics and on all types of investments.
Applications of actuarial science
Life insurance and pension plans are the two main applications of actuarial science. However, actuarial science is also applied in the study of financial organizations to analyze their liabilities and improve financial decision-making. Actuaries use this specialized science to assess the financial, economic and other business applications of future events.
In traditional life insurance, actuarial science focuses on analyzing mortality, producing life tables and applying compound interest to produce life insurance, annuity and endowment policies. In health insurance, including employer-provided plans and social insurance, actuarial science focuses on the analysis of disability, morbidity, mortality, fertility and other eventuality rates.
In the pensions sector, actuarial science compares the costs of alternative strategies with respect to the design, financing, accounting, administration and maintenance or redesign of pension plans. Short-term and long-term bond rates greatly influence these strategies – as do the funded status of pension and benefit plans, collective bargaining, employer competitors, demographic changes in the workforce. changes to the internal revenue code, changes in attitude of the internal revenue department regarding the calculation of surpluses and short and long-term financial and economic trends.
Actuarial science is also applied to property, damage, civil liability and general insurance – cases in which coverage is generally provided over a renewable period (eg annual). Coverage can be canceled at the end of the period by either party.