Insurance mathematics is concerned with the valuation of obligations arising from insurance contracts. At contract initiation, valuation is known as premium determination or ratemaking, whereas, for a contract already in force, valuation is known as reserve determination. Updating these values as information is revealed involves important techniques known as experience adjustment. Models of insurance mathematics are based on probability theory and financial economics. These models are calibrated with insurance experience and present values from returns on investments in asset markets.
KeywordsBenefit premium Calibration Central limit theorems Collective risk theory Compound interest Continuous interest rate Defined benefits Equivalence principle Expected values Health insurance Insurance mathematics Liability Life insurance Mortality Pensions Portfolio theory Present value Probability density function Recursion relationships Risk management Risk theory Selection bias Workers’ compensation insurance
- Booth, P., R. Chadburn, D. Cooper, S. Haberman, and D. James. 1999. Modern actuarial theory and practice. London: Chapman and Hall/CRC.Google Scholar
- Bowers, N., H. Gerber, J. Hickman, D. Jones, and C. Nesbitt. 1997. Actuarial mathematics. Schaumburg: Society of Actuaries.Google Scholar
- Klugman, S., H. Panjer, and G. Willmot. 2004. Loss models: From data to decisions. 2nd ed. New York: Wiley.Google Scholar
- Panjer, H., ed. 1998. Financial economics: With applications to investments, insurance and pensions. Schaumburg: Actuarial Foundation.Google Scholar