https://www.actuarialninja.com/tags/aggregate-loss-distribution/Recent content in Aggregate Loss Distribution on Actuarial NinjaHugoen-usSat, 28 Jun 2025 10:57:16 +0000https://www.actuarialninja.com/tutorials/how-to-model-and-interpret-compound-poisson-processes-for-soa-exam-c-and-cas-exam-mas-i/Sat, 28 Jun 2025 10:57:16 +0000https://www.actuarialninja.com/tutorials/how-to-model-and-interpret-compound-poisson-processes-for-soa-exam-c-and-cas-exam-mas-i/<p>When preparing for the SOA Exam C or CAS Exam MAS-I, understanding <strong>compound Poisson processes</strong> is essential because these exams test your ability to model aggregate losses—a fundamental skill in actuarial science. The compound Poisson process elegantly captures the randomness in both the <em>number</em> of claims and their <em>sizes</em>, making it a cornerstone for modeling insurance claims and risk.</p> <p>At its core, a <strong>compound Poisson process</strong> models the total claim amount as the sum of a random number of individual claims. The number of claims follows a Poisson distribution, reflecting the frequency of claims over a fixed period, while each claim size is an independent random variable drawn from the same distribution, representing severity. This setup aligns well with real-world insurance scenarios, where both how many claims happen and how big they are vary unpredictably.</p>