Actuarial terms

Actuarial assumptions Actuarial terms

Estimates of future experience with respect to rates of mortality, disability, turnover, retirement, rate or rates of investment income, and salary increases. Decrement assumptions (rates of mortality, disability, turnover and retirement) are generally based on past experience, often modified for projected changes in conditions. Economic assumptions (salary increases and investment income) consist of an underlying rate in an inflation-free environment plus a provision for a long-term average rate of inflation.

Actuarial cost method

The actuarial cost method is used by actuaries to calculate the amount a company must pay periodically to cover its pension expenses. The two main methods used to calculate the payments are the cost approach and the benefit approach. The actuarial cost method is also known as the actuarial funding method. Actuarial terms

These approaches take into consideration an employee’s current salary, the number of years they have until they retire and start receiving benefits, the annual rate at which the employee’s salary increases, the percentage of the final salary the employee will receive on a yearly basis when they retire, and the probable number of the years the individual will live to continue receiving those annual payments. Any cost-of-living adjustments (COLAs) are also built into the equation. Actuarial terms

The cost approach calculates total final benefits based on several assumptions, including the rate of wage increases and when employees will retire. The amount of funding that will be needed to meet those future benefits is then determined. The benefit approach finds the present value of future benefits by discounting them. Actuarial terms

Actuarial equivalent

A single amount or series of amounts of equal value to another single amount or series of amounts computed on the basis of a given set of actuarial assumptions. Actuarial terms

Actuarial gains and losses Actuarial terms

A measure of the difference between actual experience and that expected based on a set of actuarial assumptions, during the period between two actuarial valuation dates, as determined in accordance with a particular actuarial cost method. Actuarial gains and loss comprise:

  1. Experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and
  2. The effects of changes in actuarial assumptions. Actuarial terms

For Defined benefit obligations, actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from: Actuarial terms

  1. experience adjustments (the effects of differences between the previous actuarial assumptions and what has actually occurred); and
  2. the effects of changes in actuarial assumptions. Actuarial terms

Actuarial present value Actuarial terms

The amount of funds currently required to provide a payment or series of payments in the future. This is determined by discounting future payments at predetermined rates of interest and by probabilities of payment

Something else -   Management of credit risk for financial instruments

Actuarial value Actuarial terms

The value of pension plan investments and other property used by the actuary for the purpose of an actuarial valuation. Actuaries often select an asset valuation method that will smooth, over a period of years, the effects of short-term volatility in the market value of assets.

Actuary Actuarial terms

An actuary is a qualified statistician who uses experience tables (such as mortality tables and morbidity tables) to asses, for example, life expectancy of different age groups in pension calculations. Often employed as insurance underwriters, actuaries employ mathematical theories of probability in the determination of insurance risks, and in the administration of pension funds.

This is the definition, in short, read more:

Open amortisation period Actuarial terms

A period of time that begins again, or is recalculated with each actuarial valuation. This method is commonly used in consumer lending such as credit cards.

Actuarial terms

Actuarial terms

Annualreporting provides financial reporting narratives using IFRS keywords and terminology for free to students and others interested in financial reporting. The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. Use at your own risk. Annualreporting is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. For official information concerning IFRS Standards, visit or the local representative in your jurisdiction.

Something else -   Separation from an insurance contract

Leave a comment