Backbone of insurance: How actuarial science shapes risk in a changing world

News desk: Actuarial science remains a cornerstone of the global insurance industry, combining mathematics, statistics and financial theory to assess and manage risk across life, health and general insurance sectors.

The discipline dates back to 1693, when astronomer Edmond Halley developed one of the first mortality tables, enabling insurers to price life policies more accurately. Its evolution continued through the 18th and 19th centuries, supported by advances in probability theory from mathematicians such as Blaise Pascal and Pierre de Fermat, and later institutionalised with the formation of the Institute of Actuaries in London in 1848.

Today, actuarial models are central to how insurers determine premiums, estimate liabilities and maintain financial stability. By analysing historical data and variables such as age, geography and behavioural patterns, actuaries forecast expected losses while accounting for expenses and profit margins.

Beyond pricing, actuarial science plays a critical role in setting reserves, structuring reinsurance programmes and ensuring compliance with regulatory frameworks.

As insurers confront increasingly complex risks, actuarial practices are integrating artificial intelligence and advanced analytics. These tools are helping insurers better understand emerging challenges, including climate-related events and cyber threats.

With the global insurance market valued in the trillions of dollars, actuarial science continues to underpin industry resilience, support pension systems and enable wider access to financial protection.