Glossary

The jargon, translated.

Every field builds a wall of vocabulary. Here's the door: each term defined properly, then said again like a friend would say it.

ACAS / FCAS
The Associate and Fellow credentials of the Casualty Actuarial Society: the property & casualty equivalent of ASA/FSA.
In other words: Same ladder, different society: cars, homes, and businesses instead of lives and pensions.
Actuarial judgment
The professional skill the exams can’t fully test: choosing assumptions, weighing methods, and defending the number when the data is imperfect.
In other words: Knowing the math is table stakes. Knowing what the math can’t tell you is the career.
Actuary
A professional who measures and manages financial risk using mathematics, statistics, and business judgment: most commonly in insurance, pensions, and increasingly banking and tech.
In other words: The person companies hire to answer: how likely is this bad thing, and what will it cost us?
Annuity
A stream of payments, certain or contingent on survival, whose present value is a foundational exam and pricing calculation.
In other words: Money that arrives on a schedule. FM makes you value it; life products make you promise it.
Exam FMExam FAM
ASA (Associate of the Society of Actuaries)
The first full credential on the SOA path, earned by passing the preliminary exams plus VEE credits and required modules.
In other words: The letters that turn 'candidate' into 'credentialed actuary'. This is the credential I hold.
Exam PExam FMExam FAMExam SRMExam PAExam ASTAM
Bootstrapping
Resampling observed data to estimate the variability of a statistic: widely used in reserving ranges.
In other words: Shuffle the data you have to learn how uncertain you are.
Exam ASTAM
Capitation & health pricing terms
Health-financing arrangements where providers are paid per member rather than per service: one of many health-actuarial pricing structures.
In other words: Paying the clinic per patient, not per visit, changes every incentive.
CERA (Chartered Enterprise Risk Analyst)
A globally recognized enterprise risk management credential, earned via the ERM exam after associate-level requirements. Valued in banking, consulting, and capital modeling.
In other words: The risk-management credential, and the one I'm pursuing right now.
Combined ratio
Loss ratio plus expense ratio; below 100% means underwriting profit before investment income.
In other words: The insurer’s report card: under 100 and underwriting made money.
Copula
A function linking marginal distributions into a joint one. How dependence between risks is modeled beyond simple correlation.
In other words: The math of “these bad things tend to happen together.”
Credibility theory
The mathematics of how much weight to give your own data versus broader industry data when setting rates, Bühlmann and Bühlmann, Straub are the classic models.
In other words: How insurers blend 'what we've seen' with 'what the industry sees'. Central to ASTAM.
Exam ASTAM
Deductibles, limits & layers
Policy structures that carve losses into who-pays-what ranges: the algebra behind severity modeling.
In other words: The claim’s journey: you pay to here, we pay to there, reinsurance beyond.
Exam ASTAMExam FAM
Duration & convexity
Sensitivity measures of a bond or liability’s value to interest-rate changes: first- and second-order.
In other words: How hard your portfolio flinches when rates move.
Exam FM
ERM (Enterprise Risk Management)
Managing all of an organization’s risks (insurance, market, credit, operational, strategic) as one connected portfolio. The CERA credential’s home turf.
In other words: Zooming out from one policy’s risk to the whole company’s. My current exam lives here.
Exam FM
The SOA's financial mathematics exam: interest theory, annuities, bonds, and loans.
In other words: The other standard first exam: less calculus, more careful timeline discipline.
Exam FM
Exam P
The SOA's probability exam: distributions, expectation, and multivariate probability. Calculus-heavy and speed-pressured.
In other words: One of the two standard first exams. Beautiful math, brutal clock.
Exam P
Experience study
Comparing actual outcomes (mortality, lapse, claims) to assumed ones, then updating assumptions. The feedback loop of actuarial work.
In other words: Checking whether reality agrees with the model, then correcting the model.
FSA (Fellow of the Society of Actuaries)
The SOA's highest credential, earned after the ASA through a specialty fellowship track: life, health, retirement, quantitative finance, and more.
In other words: The 'senior' credential; typically 7 to 10 years of exams total.
GLM (Generalized Linear Model)
The workhorse statistical model of modern actuarial pricing: extends linear regression to non-normal outcomes via link functions.
In other words: The model behind most modern insurance prices. Tested on SRM and PA; used daily on the job.
Exam SRMExam PA
IBNR (Incurred But Not Reported)
Claims that have happened but haven’t been reported to the insurer yet: a core component of loss reserves, estimated with development techniques.
In other words: The accidents that already happened that nobody has called about yet. Reserving’s hardest guess.
Exam FAMExam ASTAM
Lapse & persistency
Policyholders stopping payment (lapse) or staying (persistency). Assumptions that make or break life-product profitability.
In other words: How many customers quietly walk away, and how wrong you can afford to be about it.
Loss ratio
Incurred losses divided by earned premium: the fundamental profitability diagnostic of an insurance book.
In other words: Of every premium dollar, how many cents went out as claims.
Monte Carlo simulation
A stochastic technique: generate many random scenarios and average the results to estimate values or risks that resist closed-form math.
In other words: When the formula is impossible, roll the dice a million times: rigorously.
Morbidity
The incidence and severity of illness or disability in a population: the health-insurance counterpart to mortality.
In other words: How often people get sick, and how badly: the number health actuaries live in.
Mortality table (life table)
A table of death probabilities by age (qx) used to price and reserve life products.
In other words: The actuarial family bible: at each age, the chance of not reaching the next one.
Exam FAM
Pension funding & valuation
Measuring a pension plan’s liabilities against assets and setting contribution schedules. The retirement actuary’s core work.
In other words: Making sure the money will be there when today’s workers retire.
Pipeline programs
Structured programs (IABA, OLA, Abacus, campus initiatives) moving underrepresented students into the profession: scholarships, mentorship, and exam support bundled.
In other words: The organized version of what this whole site believes: talent is everywhere, access isn’t.
Prelims (preliminary exams)
The first tier of actuarial exams: P, FM, FAM, SRM, and PA (plus ASTAM/ALTAM) on the SOA side.
In other words: The exam phase most candidates are in during university.
Exam PExam FMExam FAMExam SRMExam PA
Present value & the time value of money
The core of financial mathematics: money later is worth less than money now, discounted at an interest rate.
In other words: A dollar tomorrow is a slightly smaller dollar today. All of FM stands on this.
Exam FM
Ratemaking (pricing)
Setting the price of insurance: projecting future losses and expenses and translating them into premiums that are adequate, not excessive, and not unfairly discriminatory.
In other words: Deciding what the policy should cost: the other core actuarial job.
Exam FAM
Reinsurance
Insurance for insurers: ceding portions of risk to spread catastrophic exposure across the global market.
In other words: Insurers buy insurance too. It’s how one hurricane doesn’t sink one company.
Reserving
Estimating the money an insurer must hold today for claims that have already happened but aren't fully paid, including IBNR ('incurred but not reported') claims.
In other words: Counting the cost of promises already made. A core actuarial job.
Exam FAMExam ASTAM
Select & ultimate mortality
Recently underwritten lives show lower mortality (select period) before converging to population levels (ultimate): tables reflect both.
In other words: Freshly screened customers are healthier, for a while. The tables know.
Exam FAM
Solvency & capital requirements
Regulatory frameworks (RBC in the US, Solvency II in the EU, SAM in South Africa) dictating how much capital insurers must hold.
In other words: The rules that keep insurers able to pay claims in the worst years.
Stochastic modeling
Modeling with randomness: simulating many possible futures rather than one deterministic path.
In other words: Instead of one forecast, run ten thousand and look at the spread.
The 100-hours rule
The community's folk planning rule: roughly 100 hours of preparation per hour of exam, about 300 hours for a 3-hour prelim.
In other words: A planning floor, not a guarantee. My study planner tool is built on it.
Trend & loss development
Adjusting historical losses for inflation and maturation so the past can price the future honestly.
In other words: Old claims in today’s dollars, unfinished claims at their finished size.
Exam FAMExam ASTAM
Underwriting
The process of evaluating and selecting risks, and setting the terms to accept them.
In other words: Deciding who gets a policy and on what terms.
VaR & TVaR
Value-at-Risk (a loss percentile) and Tail Value-at-Risk (the average loss beyond it), standard risk measures in capital and ERM work.
In other words: “How bad is the bad year?” and “how bad is it once you’re in it?” Core CERA vocabulary.
VEE (Validation by Educational Experience)
University coursework credits in economics, accounting/finance, and mathematical statistics, required alongside exams for the ASA.
In other words: Degree courses that count toward your credential. Check yours early; many majors earn them automatically.
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