Fundamentals of Actuarial Science

Introduction

The main purpose of actuarial science is to assess risk and ensure the financial security of organizations in the face of potential risks. Actuaries use historical risk data to calculate future financial losses and determine the necessary reserves to mitigate these losses.

This Fundamentals of Actuarial Science course is designed for individuals in various training environments. Even if you lack prior education or training in calculus or higher mathematics, the course is structured so that missing out on certain sections will not impede your understanding of the rest.

Team projects will be conducted using Excel (or equivalent tools) to forecast and evaluate the financial condition of an organization, and to determine the best possible strategies through simulations.

Objectives

By the end of this Fundamentals of Actuarial Science course, participants will be able to:

• Understand the tools, programming languages, and software solutions commonly used by actuaries, aiding in the proper application of mathematical concepts.
• Apply the principles and methods of risk management used by organizational actuaries, with a focus on mathematical statistics.
• Gain hands-on experience with analytical methods by using spreadsheet tools like Excel to forecast and analyze financial scenarios.
• Develop communication, leadership, and teamwork skills essential for professional practice in actuarial science.
• Utilize statistical techniques effectively in the risk assessment process.

Training Methodology

• Lectures and discussions
• Case studies
• Computer lab practice with MS Excel and actuarial software
• Group work and collaborative learning
• Quizzes and knowledge retention tools
• Instruction in specific actuarial techniques
• Industrial training
• Peer reviews and exercises
• Final examination in the form of a comprehensive actuarial project

Course Outline

Unit 1: Valuing Cash Flows

• Concept of Time Value of Money
• Present Value
• Accumulated Value of a Sum
• Value of Multiple Regular Payments

Unit 2: Applications of Valuing Cash Flows

• Equations of Value for different cases
• Example of the Annuity Certain from the Programme
• Excel Application

Unit 3: Analysis of State Transitions

• Introduction to State Transitions
• Two-State Model (Alive/Dead)
• Calculation of Probabilities using the Two-State Model

Unit 4: The Life Table

• Introduction to the Life Table
• Using the Life Table to find probabilities

Unit 5: Valuing Uncertain Cash Flows

• Maximum Present Value of Expected Cash Receipts
• Accumulated Value and Restrictions

Unit 6: Modeling a Life Insurance Company

• Scenarios of Life Insurance Company Practice
• Single Projection
• Evaluating the Outcomes of Simulations
• Managing Funds
• Adjustments to Reserves
• Other Case Studies