Definition - What does Actuarial Adjustment mean?
An actuarial adjustment is a type of adjustment that happens to a company's finances or reserves which forces them to adjust the amount they pay out or the amount that they charge in order to cover the difference. Insurance companies who offer pension insurance in bulk to other businesses will present the issue to clients on occasions where the current situation varies extremely from the original situation when the insurance was taken out. Actuarial adjustments can also take place for the benefit of the company, and thereby lowering their monthly premiums due to a decreased level of output in the current year than what was expected when the insurance was taken out.
Justipedia explains Actuarial Adjustment
A common example for an actuarial adjustment taking place is when a significant group of people retire at the same time, and thus requiring access to their retirement pensions simultaneously. This creates a stress on the insurer to pay out to all parties at the expected amount. Companies will be told in advance when this event is possibly on the horizon, and will then decide between lowering the sum that will be paid to each person or charging them more for the same end result.