Casualty Actuarial Society (CAS) Practice Exam

The Prouty Approach categorizes loss likelihood into four distinct groups to aid in the evaluation of risk within actuarial studies. These categories—almost nil, slight, moderate, and definite—provide a clear framework for assessing how likely a particular loss event is to occur.

“Almost nil” refers to scenarios where the likelihood of a loss is extremely low, practically negligible. “Slight” implies that while there is a chance of a loss occurring, it remains relatively minor. “Moderate” indicates a balanced risk situation, where the event could take place but is not guaranteed. Finally, “definite” signifies that a loss event is highly likely to happen.

This structured approach allows actuaries and risk managers to categorize potential losses and make more informed decisions regarding risk management and pricing. The clarity of these categories further helps in communication with stakeholders regarding risk assessments.

The other options present various interpretations of loss likelihood, but they do not align with the specific classifications outlined in the Prouty Approach.