An estimate that represents an expected value over the range of reasonably possible outcomes is called what?

• A. Reserve Strength
• B. Actuarial Central Estimate
• C. Claim Frequency
• D. Premium Adequacy

Answer: (B)

An actuarial central estimate is the expected value of future costs across the range of reasonably possible outcomes. It represents the best estimate or the mean of the distribution, balancing optimism and pessimism rather than focusing on extreme scenarios. In self-insurance plan work, this central point comes from combining factors like claim frequency and severity to determine the anticipated liabilities.

This differs from reserve strength, which is about adding a safety margin for adverse deviations; claim frequency, while part of the calculation, is not itself the overall expected value; and premium adequacy concerns whether premiums are sufficient to cover expected costs plus loads. So the term that best matches the description is the actuarial central estimate.