Iran Official Insurance Actuary Exam key terms

The probability that an insurer's surplus ever falls below zero at some future time, given initial capital and premium inflow. It measures long-term solvency risk under a specified claim process and is central to setting capital requirements.

A stochastic model of an insurer's capital over time, equal to initial surplus plus accumulated premiums minus accumulated claim payments. Actuaries use it to study solvency, ruin, and the effect of reinsurance or dividend strategies.

The positive root of the Lundberg equation in a risk process, giving the exponential decay rate of ruin probability as initial capital grows. It is used to derive the Lundberg inequality and asymptotic ruin approximations.

The requirement that expected premium income per unit time exceeds expected claim payments per unit time in a risk model. Without it, ruin becomes certain eventually, so it is a baseline assumption for meaningful ruin analysis.

A classical risk model in which claims arrive as a Poisson process with independent, identically distributed claim sizes, and premiums flow in continuously at a constant rate. It is the standard setting for ruin probability results.

The percentage by which a premium exceeds the expected claim cost, providing a margin for random fluctuation, expenses, and profit. It directly influences ruin probability and is a core pricing parameter in non-life insurance.

A weighted average of an individual insured's own experience and a broader collective rate, where the weight reflects how much data the individual record contains. It is used in experience rating for non-life classes.

A least-squares credibility model in which the credibility weight equals the ratio of between-risk variance to the sum of between-risk and within-risk variance components. It provides a rigorous foundation for blending individual and collective experience.

The weight assigned to an insured's own observed experience when combining it with the manual or collective premium. It increases toward one as the volume of credible data grows and is often expressed as Z.

A rating method that adjusts an insured's premium based on its own past claims or loss experience relative to the class average. It rewards favorable experience and penalizes poor experience, promoting risk-adequate pricing.

A merit rating scheme in motor insurance where premiums are reduced after claim-free years and increased following at-fault claims, usually through discrete discount levels. It links individual premium to individual claims history.

A model where the total claim amount over a period is a random sum of individual claim sizes, with the number of claims following a Poisson distribution. It is widely used in collective risk theory and aggregate loss modeling.

An aggregate loss model that describes total claims as a random sum of individual claim amounts, independent of how many policies generated them. It focuses on the portfolio rather than individual policies.

A recursive formula for computing the distribution of aggregate claims when claim counts follow a member of the (a,b,0) class, such as Poisson or negative binomial. It enables efficient numerical evaluation of aggregate loss distributions.

An approach that models aggregate claims by separately estimating the distribution of claim counts (frequency) and claim sizes (severity), then combining them. It underlies most non-life pricing and reserving analyses.

A reserving technique that estimates ultimate claims by applying historical development factors to cumulative paid or incurred losses. It assumes past development patterns continue and is the most common deterministic reserving method.

The pattern by which cumulative claims for a given accident year increase over successive valuation dates as claims are reported and settled. Actuaries measure development factors to project ultimate claim costs.

A liability estimate for claims that have occurred but have not yet been reported to the insurer by the valuation date. It is part of technical reserves and requires judgment about reporting delays and ultimate severity.

The expected present value of a future benefit under a life insurance contract, computed using assumed mortality and interest. It equals the actuarial present value of the benefit and excludes expenses and profit loadings.

The expected value of a future cash flow discounted to the present using both an interest rate and the probability that the payment occurs. It is the fundamental valuation tool in life contingencies.

A series of payments made at specified intervals contingent on a person remaining alive. Its actuarial present value depends on survival probabilities and the discount rate, and it is used to value retirement benefits.

Precomputed functions such as Dx, Nx, Cx, and Mx that combine discounting and mortality so that actuarial values can be calculated by simple arithmetic from a life table. They simplify manual and spreadsheet computations.

The difference between the actuarial present value of future benefits and future net premiums at a given duration, representing funds held for existing policies. It is a core measure of life insurance liabilities.

A weighted average time until cash flows are received, used to measure a bond's or portfolio's sensitivity to interest rate changes. It supports immunization and asset-liability matching for insurers.

A strategy that matches the duration and present value of assets to those of liabilities so that net worth is protected against small parallel shifts in interest rates. It is widely used to manage interest rate risk.

The coordinated management of an insurer's assets and liabilities to meet obligations as they fall due while controlling risk and supporting solvency. It considers cash flow timing, interest rate exposure, and capital adequacy.

The excess of an insurer's admissible assets over its required liabilities and capital requirements, serving as a buffer against adverse experience. Regulators set minimum margins to protect policyholders from insolvency.

Liabilities recorded by an insurer for obligations to policyholders, including unearned premium reserves for non-life business and mathematical reserves for life business. They are a central item in insurer financial statements.

The portion of written premium that relates to the unexpired part of policies at the reporting date. It is a liability representing coverage still owed to policyholders and is calculated pro rata or by other approved methods.

The tendency of an insured to take fewer precautions or behave less carefully because insurance covers losses. Insurers mitigate it with deductibles, co-insurance, exclusions, and claims monitoring.

The tendency for higher-risk individuals to buy or retain more insurance than lower-risk individuals when insurers cannot fully distinguish risk types. It can lead to underpricing, market instability, and the need for risk classification.

The insurance principle that a claimant should be restored to approximately the pre-loss financial position, no better and no worse. It underpins limits on recovery, deductibles, and the treatment of over-insurance.

A legal requirement that the policyholder must benefit from the continued existence of the insured subject or suffer loss from its damage. It prevents gambling contracts and reduces moral hazard.

The mutual duty of the insurer and the applicant to disclose all material facts relevant to the risk, without being asked. Breach may allow the insurer to avoid the contract or adjust the claim.

Any information that would influence a prudent insurer's decision to accept a risk or determine its terms and premium. Non-disclosure or misrepresentation of such facts can affect the validity of a policy.

The process of evaluating and classifying proposed risks to decide whether to accept them and on what terms and premium. It aims to ensure that each insured pays a price commensurate with expected losses.

The ratio of incurred claims to earned premium over a period, often expressed as a percentage. It is a key indicator of underwriting performance and pricing adequacy in non-life insurance.

The sum of the loss ratio and the expense ratio, measuring total underwriting outgo relative to earned premium. A value below one hundred percent indicates an underwriting profit before investment income.

The set of professional standards requiring integrity, competence, objectivity, confidentiality, and clear communication from actuaries. It governs how actuaries serve the public interest and manage conflicts of interest in their work.

The reasoned professional opinion an actuary forms when data or models are incomplete, based on training, experience, and documented assumptions. It must be transparent, defensible, and distinguished from arbitrary choice.

Independent review of an actuary's work by another qualified professional to check methods, assumptions, and conclusions. It improves reliability of reports and is often required for statutory valuations and regulatory submissions.