Friday, June 10, 2016

What Is an Actuary?

An actuary is a business professional who deals with the measurement and management of risk and uncertainty (BeAnActuary 2011a). The name of the corresponding profession is actuarial science. These risks can affect both sides of the balance sheet, and require asset management, liability management, and valuation skills (BeAnActuary 2011b). Actuaries provide assessments of financial security systems, with a focus on their complexity, their mathematics, and their mechanisms (Trowbridge 1989, p. 7).

While the concept of insurance dates to antiquity (Johnston 1903, §475–§476, Loan 1992, Lewin 2007, pp. 3–4), the mathematics and finance needed to scientifically measure and mitigate risks have their origins in the 17th century studies of probability and annuities (Heywood 1985). Actuaries of the 21st century require analytical skills, business knowledge, and an understanding of human behavior and information systems to design and manage programs that control risk (BeAnActuary 2011c). The actual steps needed to become an actuary are usually country-specific; however, almost all processes share a rigorous schooling or examination structure and take many years to complete (Feldblum 2001, p. 6, Institute and Faculty of Actuaries 2014).

The profession has consistently ranked as one of the most desirable (Riley 2013). In various studies, being an actuary was ranked number one or two multiple times since 2010 (Thomas 2012, Weber 2013, CareerCast 2015).


Actuaries use skills primarily in mathematics, particularly calculus-based probability and mathematical statistics, but also economics, computer science, finance, and business. For this reason, actuaries are essential to the insurance and reinsurance industries, either as staff employees or as consultants; to other businesses, including sponsors of pension plans; and to government agencies such as the Government Actuary's Department in the United Kingdom or the Social Security Administration in the United States of America. Actuaries assemble and analyze data to estimate the probability and likely cost of the occurrence of an event such as death, sickness, injury, disability, or loss of property. Actuaries also address financial questions, including those involving the level of pension contributions required to produce a certain retirement income and the way in which a company should invest resources to maximize its return on investments in light of potential risk. Using their broad knowledge, actuaries help design and price insurance policies, pension plans, and other financial strategies in a manner that will help ensure that the plans are maintained on a sound financial basis (Bureau of Labor Statistics 2015, Government Actuary's Department 2015).


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The actuarial credentialing and exam process usually requires passing a rigorous series of professional examinations, most often taking several years in total, before one can become recognized as a credentialed actuary. In some countries, such as Denmark, most study takes place in a university setting. In others, such as the U.S., most study takes place during employment through a series of examinations. In the UK, and countries based on its process, there is a hybrid university-exam structure.
United States

In the U.S., for life, health, pension and property-casualty actuaries, exams are given by the Society of Actuaries, while for property-casualty actuaries the exams are administered by the Casualty Actuarial Society. The Society of Actuaries’ requirements for Associateship include passing five preliminary examinations, demonstrating educational experience in economics, corporate finance and applied statistics—called validation by educational experience (VEE), completing an eight-module self-learning series, and taking a course on professionalism (SOA 2012a). For Fellowship, three other modules, two exams, and a special fellowship admission course is added (SOA 2012c). The Casualty Actuarial Society requires the successful completion of seven examinations, two modules and VEE for Associateship and three additional exams for Fellowship. In addition to these requirements, casualty actuarial candidates must also complete professionalism education and be recommended for membership by existing members (CAS 2011a). One may become a Chartered (or Certified) Enterprise Risk Analyst (CERA) through either the SOA or the CAS.

In order to sign certain statements of actuarial opinion, however, American actuaries must be members of the American Academy of Actuaries. Academy membership requirements include membership in one of the recognized actuarial societies, at least three years of full-time equivalent experience in responsible actuarial work, and either residency in the United States for at least three years or a non-resident or new resident who meets certain requirements (AAA 2010). Continuing education is required after certification for all actuaries who sign statements of actuarial opinion (AAA 2008).

In the pension area, American actuaries must pass three examinations to become an Enrolled Actuary. Some pension-related filings to the Internal Revenue Service and the Pension Benefit Guaranty Corporation require the signature of an Enrolled Actuary. Many Enrolled Actuaries belong to the Conference of Consulting Actuaries or the American Society of Pension Professionals and Actuaries.

In 2009, the Society of Actuaries began a high-level accreditation system for universities, recognizing the best actuarial schools as Centers of Actuarial Excellence. There are two sets of criteria that must be met: A Criteria and B Criteria. Additionally, a site visit must be performed by a team of CAE committee members who evaluate the University and conduct interviews with students and faculty. The designation is retained for five years and if a criteria is not met, then the University must provide a plan for how they will address the problem within a reasonable time frame.

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