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Foundations of Casualty Actuarial Science

correlations are quantified, either by analytical
studies, or by business judgement. For e.g, " 1%
drop in unemployment rate leads to a 1.5% of
workers compensation claim frequency.

" The claims manager of a large insurance company
gets a feel of it. Moreover, conclusions can be drawn
from economic studies at the Workers Compensation
Research Institute, which has archives of decades
old records of workers claim filing behavior, or from
Insurance Research Council, which has similar
analyses.

The output of dynamic financial analysis is not a
specific number, but a future performance of the
insurance enterprise, which may be presented as
pro-forma financial statements, cash flows of assets
and liabilities, or present values of future earnings.

10) Write a note on Stochastic simulation.

Ans. Sometimes Actuaries sound very complex and hard to
understand. Clarity of communication becomes essential

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