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engineering too. Actuaries estimate loss frequency and
loss severity, whereas financial engineers estimate betas
and volatility.

(5) Discuss the concept of dynamic financial
analysis.

Ans. Dynamic Financial Analysis is nowadays gaining
popularity across insurance sectors, replacing the
traditional notions of surplus adequacy with sophisticated
models of financial performance. It is being regularly
used for reserving, ratemaking, and valuation.

Dynamic Financial Analysis is a perspective, not a
statistical tool. It is a manner of viewing the situation,
not a specific model or procedure. Dynamic analysis
assumes that various external factors may change in
the coming years, and the results of analysis may depend
on those external factors.

6) Differentiate between static & dynamic
analysis.

Ans. Static analysis, assumes that the state of the world will

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