The actuary's business: qualifications, duties and evolution of the profession

Qualities required of actuaries

Actuaries must be rigorous, synthetic and methodical. Certainly, this job requires great skills in mathematics and statistics, but that is not enough. They must exhibit perfect command over computer tools on which all calculations and simulations are conducted. Actuarial staff must also have knowledge in areas such as economics, management, accounting, finance, law and taxation. They work with colleagues in the different departments who feed them with information that they have to use in order to establish trends and forecasts. The latter's quality of work and research depends to a large extent on their mastery of all corporate functions.

Their ability to analyze and transform data is essential. They must be able to impose their studies and results independently. This independence compared to other functions of society is essential to the proper exercise of their duties.

The scope of their qualifications and skills grants them easy access to management duties. Nearly 15% of actuaries quickly move into management positions in insurance companies.

Actuaries' duties

One of the actuary's tasks is to collaborate with a view to drafting insurance contracts offered to clients. On a technical level, it is actuarial staff who:

1. Determine baseline pricing for life and non-life risks: probability of occurrence of events, calculation of premium loading and rates along with the technical profitability of the product…
2. See to contracts' profitability based on mathematical models, statistical concepts and specialized software
3. Analyze statistical data to identify trends and develop new products
4. Advise underwriters as part of their customer relations tasks, both in terms of tariffs and technical clauses,
5. Calculate the cumulative liability of natural and man-made disasters. These cumulation calculations also target specific products, particularly in the life business,
6. Determine the capacities that can be engaged by underwriters,
7. Provide expertise in the monitoring of technical reserves, the calculation of solvency margins, conformity.

In France, 2.5% of employees in the insurance sector are actuaries, ie nearly 3 800 people. Nearly 73% of them are employed in product design and pricing, control, advice and decision assistance. Almost 20% are tasked with financial surveys and evaluations while 7% are assigned to other tasks.

In the United States, 1.1% of employees in the insurance sector are actuaries, or 25 000 out of a total of 2 194 100 employees ⁽¹⁾.

⁽¹⁾ Source: Data 2018, Bureau of Labor Statistics (BLS)

Independence of actuarial duties

Actuaries must work independently. Their analyses and results should not be subject to pressure from another section of the company. Their duty is not to defend a pre-set goal. On the contrary, it is based on their work that the feasibility studies of the objectives are carried out and not the other way round. Their analyses, therefore, stand as a basis for decision-making.

Consequently, it is essential that they should not depend on underwriters, accountants, financiers and other trades. Management must also advocate this independence to prevent any bias to the results of research and analysis performed by this expert staff.

New opportunities for actuaries

In the market, actuaries have traditionally been active with insurance, reinsurance and brokerage companies. They are also found in the rating and auditing firms. Other prospects lie with regulators who are increasingly using these small gifted brains in mathematicians and probability calculations.

While the emergence of insurtechs and other start-ups involved in technological challenges tends to highlight the new data scientist posts, the actuary job involves so well that the borders separating both trades starts to diminish partially.

Evolution of actuarial profession

In the second half of the 20th century, actuarial tasks were limited to life insurance and the analysis of mortality tables. In the late 1900s and early 2000s, the non-life business gradually opened up to them. Actuaries then tackled risk modelling, the probability of ruin before gradually taking part in risk management tasks.

Today, their area of expertise is very broad. It comprises not only risk management, underwriting, financial management and reserves, but extends to all data analysis and corporate governance. Ultimately, no area of expertise can exclude this competence.

Alongside the profession's evolutionary trend, their training has also evolved. It embraces plural knowledge, ranging from mathematical or technical calculations to contract drafting, law and ethics.

Actuaries facing regulations

The successive implementation of new European standards in the area of accounting and risk management has had a significant impact on insurers. With the advent of Solvency II in 2016, the number of reports to be produced has gained momentum and the amount of information to be published has increased sharply. Reporting has changed from annual to quarterly bases. These regulatory changes have resulted strong demand for actuaries in insurance, consulting and auditing companies. The hiring of actuaries will not slow down with the next transition to the IRFS 17 accounting model.

In addition, solvency issues require projections over several decades as the economic and political environment is changing.