Actuarial Rate

DEFINITION of 'Actuarial Rate'

Actuarial rate is an estimate of the expected value of future loss. Usually, the future loss experience is predicted on the basis of historical loss experience and the consideration of the risk involved. Accurate actuarial rates help protect insurance companies against the risk of severe underwriting losses that could lead to insolvency.

BREAKING DOWN 'Actuarial Rate'

Generally, during the rate review, it is first determined whether the actuarial rates need to be adjusted. A projected loss experience gives the insurance companies the ability to determine the minimum premium required to cover expected losses.