Actuarial Analysis is the application of probability and statistical methods to calculate the risk of occurrence of any event, such as onset of illness, recurrent disease, hospitalization, disability or death, statistical risk, often using complex mathematical modeling. It may include calculation of the anticipated money costs of such events and of the premiums necessary to provide for payment of such costs. An actuary is a statistician who computes insurance and pension rates and premiums on the basis of the experience of people sharing similar age and health characteristics. Actuaries are commonly employed in the insurance and pension industries where risk assumes great importance.
This analysis typically is used to price insurance premiums and to determine the amount of reserves necessary to cover losses. Actuaries mainly work for life insurance companies, property and causality insurance companies and private companies developing pension plans.
In England during the 18th century, Abraham de Moivre and other eminent mathematicians were commonly consulted on the valuation of annuities and other interests dependent upon human life. The profession also includes statisticians who provide expert data analysis on risk assessment and risk management for the financial services sector. Actuaries are most often employed within the insurance industry, but also prepare and assess data for commercial and investment banks, retirement and pension fund administrators, or are self-employed as consultants.
Similar to technical analysis that looks for trends in financial markets; actuarial analysis looks for trends in markets pertaining to risk. A trend could be the effect on car accident claims of a new texting-while-driving law or the increase in the price of health care with the development of a highly effective but extremely expensive cancer medicine. Actuaries analyze these trends in conjunction with recorded losses in order to model future losses.
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