In the context of risk, what does "financial theory" help actuaries evaluate?

In the context of risk, "financial theory" provides a framework that helps actuaries evaluate future events affecting finance and insurance. This includes assessing potential risks and uncertainties that could impact the financial stability of insurance products or portfolios. Actuaries utilize financial theory to model future cash flows, determine the present value of those cash flows, and establish risk-based pricing. By understanding the principles of financial theory, actuaries can make informed predictions about how various factors, such as economic conditions, regulatory changes, and market fluctuations, might affect future financial outcomes for insurance companies and their clients. This predictive capability is essential for effective risk management and ensuring the solvency of insurance providers in the face of uncertain future events.