In insurance and insurance accounting, granularity reflects the level of detail at which an actuary makes estimates (specifically, in relation to cash flow items), and the level of detail at which an insurance company is required to report its financial results as per applicable accounting principles and conventions. The actuarial granularity (ACG) represents inputs gathered from the actuarial source systems. The process produces a set of key entries,where the level of detail is defined so that the estimate of cash flow items is derived from a a homogeneous set of risks (risk factors)- as homogeneous as possible. The process also involves a widest array of possible sample quantity (applying the law of large numbers).
Granularity is subdivision (by class, currency, territory, major risk groups within a class, etc.) with a reasonable level of homogeneity in the subdivisions of a business line. The selected subdivisions are expected to reflect the distinctive features of risk associated with each.
Actuaries usually differentiate between estimated cash flows according to line of business attribution: 1) property and casualty, liability, and personal accident (P&C) or 2) life insurance.
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