IAI Actuarial Core Principles · Business Management · Skills and knowledge for working as an actuary in financial services
A general insurer's board asks its actuary why the actuary's role differs from that of an accountant when assessing claims liabilities. Which statement best captures the distinguishing feature of the actuarial contribution?
Actuaries apply statistical and financial modelling to assess uncertain future cash flows and the risks around them. This forward-looking, risk-based approach distinguishes them from accountants, who record past transactions, and from auditors, who independently verify the financial statements.
- AActuaries focus on recording past transactions accurately in the ledgers
- BActuaries are responsible for statutory audit of the insurer's financial statements
- CActuaries apply statistical and financial modelling to assess uncertain future cash flows and the risks around themCorrect
- DActuaries only certify that premiums have been collected on time
- Actuaries set the insurer's marketing strategy based on competitor pricing
Explanation
Actuarial work is distinguished by modelling uncertain future events, such as claims, using probability, statistics and financial theory. Recording past transactions and audit belong to accounting and auditing functions. Marketing is not the actuary's defining role.
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