Actuarial science applies probability theory, statistics and financial mathematics to assess and manage risk, chiefly in insurance, pensions and other systems that must set aside money today against uncertain future claims. Its methods rest on mortality and morbidity tables recording how often events such as death, illness or accident occur within a population, combined with compound interest calculations to price policies and reserve appropriately. The discipline traces organized development to eighteenth century Britain, where early life insurance offices needed rigorous mortality tables to remain solvent, and actuaries remain a licensed professional class governed by formal examinations in most countries today.
Facts
Central QuestionHow to use mathematics to identify and measure risk so that it can be mitigated and priced. 1 ScopeActuarial science applies mathematical and statistical methods to assess risk across insurance, pensions, finance, investment and other industries and professions. 1 SignificanceActuarial science has been transformed since the 1980s by high speed computers and the union of stochastic actuarial models with modern financial theory. 1 Disputed
Founded YearJohn Graunt 1662 study of mortality patterns produced the basis for the original life table, the founding statistical tool of actuarial science. Edmond Halley later built his own life table on the same approach, and the profession institutional founding came a century later with the Society for Equitable Assurances on Lives and Survivorship in 1762. Actuarial Science
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Founded By
Source Edmond Halley (Wikipedia)
Sources
1. Actuarial science (Wikipedia)
WikipediaLead section, definition sentence
Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in insurance, pension, finance, investment, psychology, medicine, and other industries and professions.
Lead section, scope sentence
their job often has to do with using mathematics to identify risk so they can mitigate risk.
Lead section, closing sentence
The science has gone through revolutionary changes since the 1980s due to the proliferation of high speed computers and the union of stochastic actuarial models with modern financial theory.
History, Initial development
Another important advance came in 1662 from a London draper, the father of demography, John Graunt, who showed that there were predictable patterns of longevity and death in a group, or cohort, of people of the same age, despite the uncertainty of the date of death of any one individual.
View the Source Edmond Halley (Wikipedia)
WikipediaFounded By: Edmond Halley, Publications and inventions sectionQuote, Founded By: Edmond Halley, Publications and inventions section
This article allowed the British government to sell life annuities at an appropriate price based on the age of the purchaser.
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