What do Actuaries use probability and financial theory to assess the economic cost of, most commonly in the insurance and pension industries?
Uncertain future events
Actuaries operate fundamentally on the assessment of risk associated with events that have not yet occurred. Their primary function involves leveraging advanced knowledge of probability and established financial theory to quantify the potential economic impact of these uncertain future outcomes. This quantification is critical in sectors like insurance, where they must determine appropriate premiums based on the statistical likelihood of claims arising from events such as property damage or mortality. Similarly, in pension industries, actuaries model longevity risks and investment performance fluctuations years or decades into the future to ensure a fund remains solvent and capable of meeting its long-term obligations. This process is inherently forward-looking, distinguishing their role from those focused solely on historical reporting or immediate operational efficiency.
