What is an actuary?
An actuary is a person concerned with the application of probability and statistical theory to problems of insurance, investments, pension, and financial risk management. The majority of actuaries work for life, health, and property/casualty insurance companies, which heavily rely on actuaries' judgment to ensure financial security. Other actuaries work for actuarial consulting firms. They consult on financial services, risk management, health care fields, pension plans, and asset/liability management.
Actuaries' duties are varied, challenging and so important that they are frequently called the brains of the insurance business. Actuaries work with facts, figures and people to solve business problems. They are the statisticians of the insurance industry, but they also have broader responsibilities of financial management. Actuaries frequently evaluate the past, make use of known changes, interpret expected changes, and set future directions to determine the price of insurance and the cost of employee benefits and retirement plans. Actuaries work in many capacities within businesses, consulting firms, government agencies and universities, and often fill senior managerial roles in insurance and become senior officers or heads of companies. Most importantly, all actuaries have an aptitude for mathematics and apply it to financial situations.
"Actuary: a specialist in statistics and probability calculation applied to issues relating to insurance, pension schemes, and amortization". This is a dictionary definition. Although the origin of the word is Latin (from "actuarius: a scribe responsible for drafting minutes"), the term was first used in its modern meaning in English. This is because it was in England, and later the United States, that this professional specialty first developed. Even today, those are still the countries with the largest number of actuaries. The German term for actuary, "Versicherungsmathematiker", which literally means "insurance mathematician", unambiguously highlights the privileged relationship of this activity with math.
The actuary appeared on the scene at the time when the problem of organizing and financing a life insurance system first arose. To ensure the sustainability of such a system, it was necessary to have available statistics, mortality tables, and a calculation method for assigning to each participant a "fair" financial contribution and assessing the amounts needed by the institution to meet its financial commitments.
Today, the work of the actuary is no longer limited exclusively to life insurance institutions. Retirement and pension schemes use actuaries, who set the standards that ensure their long-term balance and monitor their implementation. Apart from life insurance, other areas of insurance also use actuaries. Accidents and fires are also "chance events". But in these areas, the law of chance is often difficult to grasp, so the actuary's role is even more important.
In Switzerland, the development of the profession of consulting actuary has long been favored by the importance of occupational pension schemes. Since the entry into force of the law governing occupational pensions, many actuaries have become graduate experts in pension insurance and consulting actuaries. This activity, which consists of advising companies on the financing of social protection, as well as insurance issues in general, is expected to expand significantly in coming years.
Even if the actuary's forecasts are correct, an insurance institution is still required to limit its liability to a certain financial level, beyond which it must share its risk with a reinsurer. It is the actuary's job to determine from what limit and to what extent the insurer's financial guarantee needs to be shared.
In several European countries, the actuary, as a specialist in forecasting random future events, has in recent years been attracted by the financial community. That is why many actuaries are active today in Europe either in banks or in financial companies, or even in organizations with access to the stock market. While this trend, for the time being, has not been very strong in Switzerland, the involvement of actuaries in the management of the assets of an insurance institution is becoming increasingly common.
"Insurance engineer": this is a possible modern definition of the actuary. Market deregulation, open borders, technological advances, and increased competition among the various financial market institutions should further strengthen the importance of an expert with these skills in the insurance world.