CAA Fellow Actuary (China) key terms

The rule that a contract's premium is set so the expected present value of future premiums equals the expected present value of future benefits plus expenses, measured on the same basis. It anchors gross and net premium calculation in life and non-life pricing.

The excess of the present value of future benefits over the present value of future net premiums, using valuation assumptions for interest and mortality. It is a statutory minimum measure of policy liabilities.

A liability measure that reflects actual pricing assumptions, including expenses, lapse, taxes and profit margins, rather than net premiums only. It is used for financial reporting and embedded value work under many regimes.

The probability that an insurer's surplus ever falls below zero over a defined horizon, given initial capital and a surplus process. It is a central risk-theory measure of solvency strength under the collective risk model.

The positive adjustment coefficient solving the Lundberg inequality for a surplus process, controlling the exponential decay rate of ruin probability. It depends on premium loading and the claim severity distribution.

A model of aggregate claims in a period as a random sum, where the number of claims and individual claim amounts are independent random variables. It underlies credibility, reinsurance and capital analysis for non-life business.

A framework for blending an insured's own loss experience with a broader class rate, weighting each by its statistical reliability. It supports experience rating and is central to non-life pricing and group insurance.

An experience-based estimate of expected loss per unit of exposure, computed as incurred losses divided by exposure, often trended and loaded. It is a common starting point for non-life and reinsurance pricing.

A multiplier applied to losses at one maturity stage to estimate their ultimate value, derived from historical claim emergence patterns. It is fundamental to reserving for long-tail liability lines.

A liability for claims that have occurred by the valuation date but were not reported to the insurer by that date. Its estimation relies on reporting lags, case reserves and development patterns.

The amount set aside for a specific reported claim based on the adjuster's estimate of ultimate cost. Case reserves are reviewed as the claim develops and feed into aggregate reserve estimates.

The expected present value of future cash flows using assumptions that are neither deliberately prudent nor optimistic. It is a building block for solvency capital and risk-based reporting frameworks.

The amount of capital a regulator requires an insurer to hold so it can absorb adverse shocks and meet obligations with a specified high probability. It is often derived from a risk-based formula or internal model.

An additional liability above the best estimate that compensates a hypothetical transferee for bearing insurance risk. It is often computed as a cost-of-capital charge on required capital over the run-off period.

An insurer's internal process for identifying, measuring and managing its risks and assessing whether it holds adequate capital over the business plan horizon. Regulators review it as part of supervisory review.

A firm-wide approach to identifying, assessing, monitoring and managing all material risks, including insurance, market, credit, operational and strategic risk, within a single governance and capital framework.

A formal articulation of the types and amounts of risk an insurer is willing to accept in pursuing its objectives, often expressed as limits and tolerances. It guides strategy, pricing and capital allocation.

The risk that asset cash flows and liabilities respond differently to interest rate, inflation or other market movements, causing a change in surplus. It is managed through duration matching, cash-flow matching and hedging.

Selecting assets so their interest-rate sensitivity, measured by Macaulay or modified duration, offsets that of the liabilities. It reduces surplus volatility from parallel shifts but does not eliminate curve or convexity risk.

An asset portfolio strategy designed so that liabilities can still be met if interest rates change, typically by matching duration and present value and arranging asset dispersion around the liability horizon.

A measure of the economic worth of a life insurer comprising net asset value plus the present value of future profits from in-force business. It is disclosed with adjustments for the cost of capital and risk.

An asset recognized when commissions and other acquisition costs on new business are capitalized and amortized over the policy period rather than expensed immediately. Its treatment materially affects reported profit timing.

A required comparison of recognized insurance liabilities against a current estimate of future cash flows, with any deficiency charged to profit or loss. It prevents carrying overstated reserves or understated obligations.

The point at which an insurer can reassess and reprice the risks of an insurance contract, determining which future cash flows belong to the existing contract. It strongly affects measurement of liabilities.

The mutual obligation on insurer and policyholder to act honestly and disclose material facts relevant to the contract. Breach can allow the other party to avoid the contract or claim a remedy.

Information that would influence a prudent insurer's decision to accept a risk or set its terms. Failure to disclose material facts at proposal may entitle the insurer to avoid the policy.

A legal and economic relationship such that the policyholder benefits from the subject's continued existence or suffers loss from its destruction. It is required for a valid insurance contract and prevents wagering.

The rule that a property or liability claim payment should restore the insured to the financial position held before the loss, not produce profit. It underpins subrogation, salvage and underinsurance adjustments.

The insurer's right, after paying a claim, to step into the insured's shoes and recover the loss from the party legally responsible. It supports the indemnity principle and reduces net claim cost.

Amounts the insurer obtains from disposing of damaged property or recovering money after a loss, which reduce the net claim paid. Recoveries are estimated in reserving and reflected in reinsurance arrangements.

A binding or advisory pronouncement issued by an actuarial professional body that specifies required practice, documentation and disclosure for defined work. Compliance supports credibility of actuarial opinions before regulators and boards.

A formal statement by a qualified actuary on matters such as reserve adequacy, pricing sufficiency or capital, supported by analysis and required disclosures. It carries professional accountability and may be filed with regulators.

Independent scrutiny of an actuary's work by another qualified professional before it is relied upon. It tests assumptions, methods and documentation and is often required for high-impact opinions.

A projection using a single set of fixed assumptions for each scenario, producing one path of results. It is simple to communicate but cannot by itself quantify the probability of adverse outcomes.

A projection in which one or more assumptions are treated as random variables, generating a distribution of outcomes. It supports tail-risk measurement, capital calibration and option pricing.

A numerical method that repeatedly samples random scenarios from assumed distributions and aggregates the results to approximate an outcome distribution. It is used for capital, pricing and risk aggregation.

The risk of loss or wrong decisions arising because a model is misspecified, misused or based on flawed assumptions and data. It is managed through validation, documentation, governance and sensitivity testing.

Comparing model outputs or risk measures with realized outcomes or historical data to assess predictive accuracy. Persistent exceptions indicate calibration problems and may trigger model recalibration or capital add-ons.

Evaluating financial results under specified hypothetical or historical stress conditions, such as a sharp interest-rate rise or pandemic. It complements statistical models by exploring plausible but severe events.