Why actuaries are needed

Actuaries analyse the financial costs of risk and uncertainty. Using maths, statistics and financial theory, they assess the risk that an event will occur and help businesses and clients develop policies that minimise the cost of that risk. In particular, actuaries’ work is essential to the insurance industry.

Actuaries are therefore needed to develop, price, and evaluate insurance products in order to calculate the costs of new risks.

Insurance companies hire actuaries to analyse the huge volume of information – such as medical or property data – collected from consumers. The increase in available data allows insurance companies to better develop new products, set competitive prices, predict consumer behaviour, and make more accurate projections of future risks and costs.

Additionally, health insurance companies need actuaries to evaluate the effects of changing healthcare regulations and guidelines, expand into new insurance markets, and offer products to new customers.

Actuaries are also needed to help companies manage their own risk; this is known as Enterprise Risk Management. Actuaries help companies avoid, manage, and respond to any potential financial risks across all areas of their business operations.

What actuaries do

Actuaries often work in teams that include professionals in other fields – such as accounting, underwriting and finance. For example, you might work with financial analysts to set the price for security offerings, or with market research analysts to forecast demand for new products.

Examples of specific areas that actuaries might work on include:

  • Estimate the probability and likely economic cost of insurable events such as death, sickness, an accident or a natural disaster
  • Design, test, and administer insurance policies, investments, pension plans, and other business strategies to minimise risk and maximise profitability
  • Explain findings and proposals to company executives, government officials, shareholders and clients
  • Compile statistical data for further analysis

Insurance specialisation

Most actuaries work at insurance companies, where they help design policies and determine the premiums that should be charged for each policy. They must ensure that the premiums are profitable (taking into account risk) yet competitive with other insurance companies.

Areas of specialisation in insurance include:

  • Health insurance actuaries help develop long-term care and health insurance policies by predicting expected costs of providing care under the terms of an insurance contract. Their predictions are based on numerous factors, including family history, geographic location, and occupation
  • Life insurance actuaries help develop annuity and life insurance policies for individuals and groups by estimating, on the basis of risk factors such as age, gender, and tobacco use, how long someone is expected to live
  • Property & casualty insurance actuaries help develop insurance policies that insure policyholders against property loss and liability resulting from accidents, natural disasters, fires, and other events. They calculate the expected number of claims resulting from automobile accidents, which varies with the insured person’s age, sex, driving history, type of car, and other factors
  • Pension and retirement benefits actuaries design, test, and evaluate company pension plans to determine if the expected funds available in the future will be enough to ensure payment of future benefits. Pension actuaries also help businesses develop other types of retirement plans and healthcare plans for retirees. In addition, they provide retirement planning advice to individuals

Other areas of specialisation

  • Actuaries also act as Consultants – for example with the Big Four accounting firms – and provide advice to clients on a contract basis. Consulting actuaries generally audit the work of internal actuaries at insurance companies or handle actuarial duties for insurance companies that are not large enough to keep their own actuaries on staff
  • Enterprise risk management, where actuaries identify any risks, including economic, financial, and geopolitical risks that may affect a company’s short-term or long-term objectives. They help top executives determine how much risk the business is willing to take, and they develop strategies to respond to these issues
  • Actuaries can also apply their expertise to financial matters outside of the insurance industry. For example, they develop investment strategies that manage risks and maximise returns for companies or individuals

Careers abroad for actuaries

Bermuda is a leader in offshore risk financing and well known as a global centre of insurance. Perhaps unsurprisingly, the population of Hamilton has the highest proportion of actuaries in the world, leading to career opportunities for actuaries on the Island.

Promotion for actuaries

Advancement depends largely on job performance and the number of actuarial exams passed. For example, actuaries who achieve Fellowship status often supervise the work of other actuaries and provide advice to senior management. Actuaries with a broad knowledge of risk management and how it applies to business can rise to executive positions in their companies, such as Chief Risk Officer or Chief Financial Officer.

See also: Love Actuary | What Do They Actually Do? and Bermuda Actuarial Jobs

 

If you’re a qualified or part-qualified actuary who is interested in working in Bermuda, visit our jobs portal to see the latest vacancies. Signing up on our Hot Jobs email bulletin will also give you access to a downloadable All You Need to Know guide which will tell you all you need to know about living and working offshore.