Introduction to Ruin Theory

Ruin theory helps insurers assess the risk of running out of funds due to excessive claims. By balancing premium income against expected claims, insurers can predict their probability of insolvency and make crucial adjustments. In our example, premiums fell short of claims, highlighting the need for higher rates or better risk management to ensure financial stability. Actuarial models like ruin theory guide companies in maintaining solvency and avoiding financial ruin. #ActuarialScience #RuinTheory #RiskManagement #InsuranceSolvency #FinancialStability