Job Profiles - Actuaries
The Actuarial Profession − making financial sense of the future
Actuaries apply their statistical and mathematical expertise and knowledge to the financial world. They look at what's happened in the past and use it to make predictions about the future, developing business strategies which are appropriate given the risks involved and their probabilities of occurring.
The mathematicians and economists can, of course, suggest all sorts of models and approaches, and there are specialist IT actuarial packages which make traditional numbercrunching tasks less time-consuming. However it is the actuary who will need to choose the specific methods and data to use, so as to be able to stand by the results and accept the reallife consequences of them being wrong. So the actuary is very much a person of judgement rather than one who simply applies technique.
Correspondingly, actuaries will usually have responsible, senior and well-respected positions in organisations.
To qualify as an actuary, a candidate must pass a set of professional examinations. There are several papers covering many areas. Exemptions may be available from some of the papers, depending on a candidate's previous qualifications.
What does this career entail?
Actuaries develop a sound understanding of the financial world and the skills to solve business problems. They are required to analyse data to interpret the past, create models to forecast the future, assess risks, estimate outcomes and communicate facts, ideas and recommendations in a way that can be understood by actuaries and non-actuaries alike. They work in many areas that directly benefit the public, including life and non-life insurance, advising pension funds, savings, capital projects, investment, healthcare and risk management. Such work offers management opportunities, often at boardroom level, with actuaries having a commercial as well as technical role.
The variety and choice of rewarding opportunities available mean that it's a stable profession, with very few actuaries unemployed or feeling the need to leave the actuarial world. The actuarial qualification is an excellent and widely recognised base for a business career. Details about actuarial work in a number of key sectors follow.
Life assurance companies provide pensions, life assurance and other financial services. Actuaries are involved at all stages in the product development and in the pricing, risk assessment and marketing of the products. In addition, actuaries fill key roles in financial management and the investment of policyholders' money: developing strategies that ensure customers get a good return. It is a legislative requirement that each UK life office has an "Appointed Actuary". The Appointed Actuary has the statutory responsibility for certifying that the company can pay claims and for ensuring that the many millions of pounds invested by policyholders is secure, and is required to represent the policyholders' interests. In an increasingly global business world, mergers between life companies are becoming more frequent. However, when life offices are bought and sold or life funds merged, actuaries tend to be retained by both sides.
Actuaries are increasingly involved in taking a view of the whole market in order to assess a particular company's competitive position. They can achieve this by analysing the statutory and regulatory returns made by life assurance companies to the Stock Market and the Financial Services Authority. This analysis is often supplemented by visits to meet a company's senior management face to face.
General insurance is a rapidly growing area of employment for actuaries, both within insurance companies and at Lloyd's, where they also have certain statutory duties. General insurance includes personal insurance, such as home and motor insurance, as well as insurance for large commercial risks. As there are many different factors which can affect the size and number of claims, general insurance companies employ actuaries to assist with their financial management, in particular in connection with premium rating and reserving. Actuarial and statistical techniques are used extensively in the analysis of often substantial amounts of available data. This analysis is then used to rate the risks and to ensure that claims reserves are adequate. Increasingly actuaries are being asked to provide formal opinions on the technical provisions for general insurance companies. They are also involved
in sales and purchases of general insurance companies.
Actuarial consultancies are probably the biggest employers of actuaries in the UK. Many actuarial consultancies offer advice to employers and trustees who run occupational pension schemes. The 1995 Pensions Act made it a statutory requirement for the trustees of a pension scheme to appoint an actuary. The advice to clients will cover a wide range of topics from setting up a new scheme to assessing the level of contribution to be paid by the members and valuing the fund if the company is to be taken over.
Additionally, consultancies will offer a whole range of services to their clients, such as acquisitions, mergers, corporate recovery and financing capital projects. Because of their knowledge of the finance industry and their technical skills, actuaries work alongside other business professionals in consultancy firms.
The Government Actuary's Department (GAD) provides advice to the Government via Royal Commissions, as well as giving advice to other government departments and a wide range of public sector bodies including local authorities and the NHS. An important part of this work concerns the occupational pensions for about 4 million people via the operation of the National Insurance Fund. GAD also produces the official national population projections for the UK and reports regularly to Parliament.
Investment Management Actuaries have been involved in the field of investment management for decades. Indeed, it is probably true to say that more people have exposure to actuaries through the daily stock exchange indices than through any other source. Actuaries are involved in buying and selling assets, investment analysis and portfolio management. In addition, actuarial techniques are ideal for use in measuring investment performance. Many employers recognise the skills that actuarial training provides and have allowed actuaries to develop these techniques alongside those of other specialists such as financial economists. Solving problems while making correct investment decisions is a constant stimulus. Actuaries are continually seeking to improve their tools both in development of valuation models and in refinement of traditional methods. Detailed knowledge of statistical and actuarial techniques is needed.
Although generally regarded as the province of the investment banker, actuaries are today demonstrating that they can add value in this area. An actuary's basic skills in forecasting and assessing risks are ideal for estimating whether a capital project (e.g. for a new hospital or a transport infrastructure project) is financially viable. Employers might include property companies, government departments or management consultancies specialising in this area. As an example of innovative work, actuaries have been heavily involved in helping to produce a manual entitled Risk Analysis and Management for Projects (RAMP). This illustrates how actuarial skills can be used in very non-traditional areas.
Another area in which actuaries are becoming progressively more involved is banking. To some extent this has arisen because the old barriers that existed between insurance and banking have been broken down. In particular, a number of leading insurance companies now have their own banking operations with a number of senior executives being actuaries.
As in other areas, actuarial training in the use of models, probability theory and the mathematics of finance makes actuaries well skilled for the field.
With recent legislation leading to more private healthcare provision, there are new opportunities for actuaries. Insurance companies are extending their range of products to include medical insurance, critical illness insurance and disability insurance. Again, actuarial techniques are used to assess the premium rates and reserves. The actuarial profession also participated with the Royal Commission to examine long-term care for the elderly, demonstrating again the high value placed on actuaries' skills, knowledge and impartiality.
Actuaries are often involved in court cases requiring specialist evidence − such as calculating damages for industrial injury or unfair dismissal, assessing the value of pensions in divorce settlements, and acting as expert witnesses in complex fraud trials.
Who employs Actuaries?
Traditionally it has been the insurance companies and actuarial consultancies that have employed actuaries. However, as the skills of an actuary are increasingly being recognised, actuaries are increasingly employed in other fields such as banking, investment, capital projects and healthcare.
What qualifications are typically required?
All would-be actuaries need to be competent mathematicians (there is a minimum entry requirement in terms of A-level mathematics or the equivalent in other systems). Recruitment to train for the profession is usually at graduate level. Although any degree is acceptable, most employers recognise that a numerate degree offers a sound background for actuarial training. There are universities that offer actuarial science undergraduate and postgraduate courses, as well as a growing number that teach actuarial modules within mathematics or statistics degrees.
Qualification as an actuary then involves passing the professional examinations of the Faculty and Institute of Actuaries. Generally this takes between three and six years. Students who have achieved an appropriate standard in a relevant degree may be awarded exemptions from some of the examinations.
Trainees take the examinations at their own pace, usually while working for an actuarial employer. Although trainees typically have to study for about 15 hours a week, they are given time off work and plenty of other support. Studying is undertaken by distance learning; however, some employers may offer mentors and arrange tutorials in the office.
The most successful actuaries also have excellent communication skills and combine professional integrity with a commercial outlook. So prospective entrants to the profession need to show evidence of these important general skills as well as proving their intelligence by means of an impressive examination track record.
Continuing professional development (CPD)
Actuaries are able to enter new areas of work because the learning never stops. Professional qualification is only the beginning. Continuing professional development (CPD) is vital for the individual and for the employer to meet the challenges of change.
Actuaries have to keep up to date with technical issues and with the constant changes in legislation and other developments in their areas of work. They also of course have to maintain high general standards of professionalism. So all actuaries are required to follow a CPD scheme, though there is flexibility in the details of the requirements. Full information is available on the Faculty and Institute of Actuaries website.
Salaries and opportunities for advancement
An actuarial career can offer considerable rewards both intellectually and financially. Actuaries have always been amongst the highest paid professionals in the UK and in addition to the salary there is usually an excellent package of benefits. A graduate trainee actuary can currently start on around £25000 to £35000 per year, with newly qualified actuaries typically earning between £45000 and £55000 per year. Thereafter, rapid salary progression can continue, and many senior actuaries earn over £100000 per year. It's not a matter of money for your life; actuaries work hard, but they also have time to enjoy a great lifestyle. Actuaries are well paid because the standards of the profession are high. As the financial world becomes more complex, the status and salaries of actuaries are set to rise even higher. Increasingly actuaries are moving from the back room to the boardroom, managing companies rather than merely advising them. The variety of world-wide opportunities is so great that it's easily possible to change career within the profession; few people ever move away from actuarial work altogether.
How to locate job vacancies for Actuariess
Details of employers who have trainee positions are given in the list of employers available from the Faculty and Institute of Actuaries. The Inside Careers Guide also has details of actuarial employers. Another good source of information is the actuary section of Learndirect Careers Advice. Most employers advertise in annual recruitment directories and many have their own
websites. Some employers attend careers fairs at universities. University careers services will have further details about employer presentations and careers fairs.
Smita Patel (Royal & Sun Alliance). Completing my BSc degree in Actuarial Mathematics and Statistics allowed me to gain exemptions from some of the professional exams. Since then I have been working at Royal & Sun Alliance in the pensions department. My work mainly focuses on triennial valuations though there are many other aspects to my job and I find that each day brings its own challenges. During this time I have gained more computer knowledge such as Visual Basic for Applications and work-specific packages. Recently I have had the opportunity to take on a more prominent role, which means more of my time is now spent planning, organising and managing the workload of colleagues.
As a part of my training, at the end of the year I shall be moving into General Insurance. This will allow me to gain a wide range of actuarial experience before making my decision of which area I would like to dedicate myself to after qualifying. Balancing full-time work with professional examinations is a taxing experience. However, the career I have chosen to pursue is very rewarding, both in job satisfaction and financially!
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