K-factor (Actuarial)

The K-factor is an actuarial concept used to represent the expected number of insurance claims or policyholder events over a specific time period. It is often used in life insurance, health insurance, and pension planning to estimate risk and future liabilities. Actuaries calculate the K-factor based on historical data, demographic trends, and statistical models to ensure that insurance companies set premiums and reserves at appropriate levels to cover future claims.

Example

An actuary calculates a K-factor for a life insurance policyholder group, predicting the expected number of deaths in the next year to ensure the company has sufficient reserves to cover claims.