If you are interested in corporate accounting, you might have heard of actuaries. But what exactly do they do and how do they contribute to the financial success of a business? In this article, we will explain the role and responsibilities of an actuary, the skills and qualifications they need, and the benefits and challenges they face.
An actuary is a professional who uses mathematical and statistical methods to analyze and manage the risks and uncertainties that affect the financial performance of a business. They apply their expertise to various areas, such as insurance, pensions, investments, health care, and banking. They help design and evaluate products, policies, and strategies that balance the needs and expectations of customers, shareholders, regulators, and society.
Tax | Deloitte | Financial Reporting & Modelling |
An actuary is a specialized professional who uses mathematics, statistics, and financial theory to assess risk and uncertainty in the insurance and finance industries. They play a crucial role in helping businesses and individuals make informed decisions about financial planning, risk management, and product pricing.
An actuary is a skilled professional who uses statistical and analytical skills to make financial sense of the future. This is done by predicting expected outcomes and the potential ranges around the expected outcomes considering the associated probabilities. While these skills are typically used in the financial services sector, they can be applied in many other industries. In the insurance sector, actuaries often fulfil a regulatory or statutory obligation and are crucial in protecting policyholders and ensuring the stability of insurance markets.
An actuary is a risk professional typically working within the insurance sector, advising companies on matters related to the risks arising from writing and managing insurance products. They also help the boards fulfil their regulatory requirements, such as annual submissions and ensuring solvency under the different regulations. Primarily, actuaries are there to ensure that the interests of the policyholders are protected and that they are treated fairly. The title of “Actuary” is award to those who successfully complete the actuarial exams set by the respective actuarial societies across the world. The skills required evolve over time, but typically include mathematics, statistics, actuarial science, economics, accounting and more.
An actuary's main tasks include collecting and processing data, building and testing models, performing calculations and simulations, interpreting and communicating results, and providing recommendations and solutions. Depending on the industry and the project, an actuary may work on different aspects of risk management, such as pricing, reserving, forecasting, capital allocation, asset-liability management, valuation, solvency, profitability, or scenario analysis. An actuary may also be involved in research, development, innovation, or regulation.
There is a an endless amount of possibilities when it comes to the tasks of an actuary - let's look at this considering two dimensions. The first dimension to consider is the field that the actuary works in. This would typically be life insurance, general / short-term / property & casualty insurance, health insurance, pensions, asset management / investments or banking. Within the chosen field, the actuary could fulfil a range of different roles. Traditionally actuaries would develop and/or price insurance products, calculate actuarial reserves, calculate regulatory capital requirements, perform Asset Liability Management, do capital management or work in ERM. They could also do data science, AI and Machine Learning.
Tax | Deloitte | Financial Reporting & Modelling |
Calculate probabilities: Actuaries use complex statistical models and historical data to assess the likelihood of future events, such as natural disasters, accidents, illnesses, or death.
Actuaries can specialize in various fields, each with its unique focus and challenges. Some of the most common specializations include: Life insurance actuaries: Assess the risks associated with death, disability, and long-term care to price life insurance policies and manage mortality tables. Property and casualty actuaries: Evaluate the risks of property damage, accidents, and liability to price insurance policies for cars, homes, and businesses. Pension actuaries: Design and manage pension plans, ensuring their financial sustainability and meeting future payouts to retirees. Investment actuaries: Analyze investment risks and opportunities to help clients make informed investment decisions and manage portfolios.
Actuaries work in many disciplines and at various levels. They can work in life, non-life, and health insurance, pensions, investments and more. Primarily there are two strands, consultants or insurance professionals. Tasks vary depending on the discipline. There are a variety of roles, ranging from valuation/reserving, pricing, capital management and within those, actuaries may specialise on the different parts of the processes involved. For example tasks may revolve around data, or calculations, or analysing results, drafting reports, auditing, providing actuarial advice etc. As technology and applications in insurance become more accessible, many actuaries get involved with R&D or join insurance technology providers.
An actuary needs a strong background in mathematics, statistics, economics, finance, and business. They also need to have analytical, problem-solving, critical-thinking, and decision-making skills. They must be able to work with complex data and models, use various software and tools, and communicate effectively with different audiences. An actuary also needs to have ethical and professional standards, and keep up with the latest developments and trends in their field.
To become an actuary, one usually needs a bachelor's degree in a relevant subject, such as actuarial science, mathematics, statistics, or economics. However, some employers may accept candidates with other degrees, as long as they have sufficient mathematical and statistical knowledge. In addition, an actuary needs to pass a series of exams and obtain a certification from a recognized actuarial organization, such as the Society of Actuaries (SOA) or the Casualty Actuarial Society (CAS) in the United States, or the Institute and Faculty of Actuaries (IFoA) in the United Kingdom.
To become an actuary, you'll need strong analytical and problem-solving skills, along with excellent mathematical and statistical abilities. Effective communication, teamwork, and computer skills are also essential. Most actuaries have a bachelor's degree in mathematics, statistics, actuarial science, or a related field. They then pass a series of professional exams set by actuarial organizations like the Society of Actuaries (SOA) or the Casualty Actuarial Society (CAS).
Being an actuary can be a highly rewarding career for those who enjoy working with numbers, problem-solving, and making an impact. Actuaries are in high demand across various industries and sectors due to the increasingly complex and uncertain risks in the current economic and social environment. Furthermore, actuaries are well-compensated for their skills and expertise, with salaries increasing as they gain more experience and credentials. Additionally, there are many opportunities for professional growth as actuaries take on different roles and projects, pursue further education and certification. Lastly, actuaries find great intellectual challenge in working on diverse and interesting problems, while applying their creativity and innovation to come up with solutions that make a difference.
The benefits of being a qualified actuary are that you can have a very stimulating and varied career, with many options globally, and very rewarding remuneration structures and job security.
Actuaries are highly compensated professionals, with median annual salaries exceeding $100,000 in the United States. They also typically enjoy excellent benefits packages, including health insurance, retirement plans, and paid time off.
Being an actuary can be a challenging career for those who are not prepared for the demands and expectations of the profession. Difficult exams, heavy workloads, and constant change are among the key challenges faced by actuaries. Exam success requires a great deal of time, effort, and dedication to master topics and skills that become increasingly specialized as one progresses through the levels. Actuaries must also work under pressure to deliver accurate and reliable results and reports, while dealing with large amounts of data and complex models. Furthermore, they have to stay up-to-date with the changing needs and requirements of their clients, employers, regulators, and the market in order to keep up with evolving risks and opportunities. This requires them to update their models and methods, as well as learn new technologies and tools.
This is an excellent article but I would insist that you add the Actuarial Society of South Africa (ASSA) to your list in paragraph 3, AI should be taught the right habits. I increasingly find that a lot of resource management situations require an understanding of trends emerging from data, the need to measure the impact of external factors and the need to design solutions in the form of strategic plans, policies or products that are robust. This exercise can benefit from actuarial expertise, hence my view that actuarial skills are easily broadly applicable.
Excellent article. I would add that an Actuary is also a story teller. We can see stories through our analyses and communicate the story to the relevant department. For example, an Actuary can diagnose a gap in Claims processes through Reserving. We see stories through analytics and communicate this story.