Korea Insurance Actuary key terms

The amount an insurer must hold to cover future obligations on in-force policies, computed as the excess of the present value of future benefits and expenses over the present value of future premiums under a specified valuation basis.

A reserve calculated using a valuation premium equal to the net premium, so that the reserve equals the present value of future benefits minus the present value of future net premiums, isolating mortality and interest effects from expense loading.

A reserve computed with the gross (office) premium actually charged, reflecting expense loadings and profit margins, generally lower than the net premium reserve in early durations because expense recovery is anticipated.

The amount paid to a policyholder who terminates a policy early, typically derived from the policy reserve after deducting surrender charges and outstanding policy loans.

A duration-by-duration relationship stating that the reserve at the end of a year equals the prior reserve plus interest, plus premium, minus the cost of insurance and expenses; also called the recursive or retrospective accumulation formula.

A tabulation of age-specific mortality measures such as qx, px, lx and dx from a single cohort or period basis, used to compute survival probabilities and expected present values in life contingencies.

The probability that a life aged exactly x dies before reaching age x+1, equal to dx divided by lx in a life table.

The probability that a life aged exactly x survives to age x+1, equal to 1 minus qx and to lx+1 divided by lx.

The expected remaining lifetime of a life aged x, denoted ex, computed as the sum or integral of survival probabilities over future ages.

The expected present value of a unit payment made at each future period while a life aged x survives, denoted ax or äx depending on whether payments are at period end or beginning.

The portion of premiums accumulated with interest and reduced by mortality and expense charges that builds the policyholder's fund in universal life and similar account-based products.

The rate at which money accumulates over time; in actuarial valuation it converts future cash flows to present values, and the choice of valuation rate directly affects reserve adequacy.

The factor v = 1/(1+i) used to discount a payment one period into the future; v^n discounts a payment n periods ahead.

The set of assumptions - mortality table, interest rate, lapse and expense assumptions - prescribed or elected for computing statutory reserves, balancing solvency prudence against competitiveness.

The expected claim cost per unit of sum insured for a given period, formed from the product of the mortality or morbidity rate and the benefit amount, used in natural and step-rate premium calculations.

A premium equal to the expected claim cost for the current period only, rising with age as mortality increases and containing no savings element.

A constant premium payable over the policy term that exceeds natural premiums in early years, with the excess accumulating as a reserve to fund higher claim costs at older ages.

The branch of actuarial mathematics that values payments contingent on survival or death, combining probability of survival with interest discounting.

A group of independent exposure units whose premiums and claims are pooled so that aggregate outcomes become more predictable through diversification, the core mechanism of insurance.

The statistical principle that the average of independent, identically distributed observations converges to the underlying expected value as sample size grows, underpinning stable loss ratios in large pools.

The result that the standardized sum of many independent random variables tends to a normal distribution, justifying normal approximations for aggregate claims and for setting solvency margins.

A model of aggregate claims in a period as a random sum of individual claim amounts, where claim count and claim size are modeled separately, often via compound Poisson assumptions.

The distribution of a random sum of independent identically distributed claim amounts where the number of claims follows a Poisson distribution; its mean is the product of frequency and severity means.

A recursive formula that computes the distribution of aggregate claims when claim counts follow a member of the (a,b,0) class, such as Poisson or negative binomial.

A method for blending an individual insured's own experience with a broader class experience, weighting each by a credibility factor that grows with the volume and stability of the individual data.

A ratemaking approach that adjusts an insured's premium for its own past loss experience, typically through credibility-weighted modification of a manual rate.

Incurred losses divided by earned premiums over a period, a core indicator of underwriting profitability and a common basis for experience rating and reserving analysis.

The sum of the loss ratio and the expense ratio; a value below 100 percent indicates an underwriting profit before investment income.

The probability that an insurer's surplus ever falls below zero, studied in risk theory as a function of initial surplus, premium loading and claim size distribution.

Available capital divided by required capital under a risk-based capital framework; a ratio at or above the regulatory threshold indicates adequate financial strength to absorb adverse experience.

A legal agreement in which the insurer promises to pay benefits on specified contingencies in exchange for premiums, governed by the principle of utmost good faith and insurable interest.

The applicant's obligation to truthfully disclose material facts the insurer needs to assess risk; breach may allow the insurer to rescind the contract within a statutory period.

The regulated activity of marketing and selling insurance, subject to rules on disclosure, suitability, prohibited inducements and qualifications of agents and brokers.

The insurer's performance of its contractual obligation to pay benefits on an insured event, subject to claim investigation, exclusions and statutory payment deadlines.

The process of investigating a claim, determining whether it is covered, and quantifying the payable amount, performed by loss adjusters under regulatory standards.

A product where benefits vary with the investment performance of separately managed funds, with investment risk borne by the policyholder and a guaranteed minimum sometimes provided.

An estimation approach that combines prior beliefs about a parameter with observed data through the likelihood to produce a posterior distribution, widely used in credibility and mortality graduation.

A method of estimating parameters by choosing values that maximize the probability of the observed data, commonly applied to fit mortality and claim frequency models.