What is Actuarial Science?
Actuarial Science or Actuary Science is the statistical and mathematical analysis of risk in the field of insurance. Actuaries evaluate the financial risk and the future economic implications of an uncertain future. You will often find actuaries employed in financial investment institutes and insurance companies.
Actuaries are usually responsible for determining the monetary amount for which a client will be covered. As well as assessing the likelihood of having to pay out their claims. You are required to pass a series of actuarial exams in order to be certified as an Actuary. Without Actuaries, insurance companies would not exist as the services they provide allow the insurance companies to insure their clients, while being able to turn a profit.
What Do Actuaries Do?
Actuaries utilize a combination of mathematical and financial models to compare the risks and rewards of future events. Analyzing the risk of these future events requires an Actuary to use statistical and probability analysis. As well, they should also have a firm understanding of the clients’ business in order to make an informed decision.
Additionally, actuaries are sometimes responsible for using financial models to forecast for future events. For example, an Actuary might be tasked with calculating the amount of income required to produce a comfortable retirement.
This diverse skill set makes Actuaries the backbone of any insurance or financial organization where providing accurate mathematical and statistical analysis is essential.
What is the Importance of Actuarial Science or Actuaries?
Actuaries play a significant role in the Financial services sector. Their expertise and knowledge assist the financials sectors to rate securities and financial instruments. Ratings analyzed by Actuaries directly influence the cost of a given financial service/instrument, thus their extreme accuracy is vital. Actuarial Science is an essential way to evaluate the reward and the risk that accompany a financial instrument or service released by a financial organization.
The insurance industry, in the United States, employs approximately 60% of all registered actuaries. Actuaries allow insurance companies to effectively decide which clients to insure and calculate the payments, deductibles necessary to turn a profit.
Actuarial Science – Different Types of Actuaries
A majority of Actuaries provide their services to a sole employer by working exclusively for their company. Typically, they primarily practice one aspect of Actuarial Science; they become experts at this single facet. Others work as consultants on contracts of varying duration’s. Some work as employees of an actuarial consulting firm, and others go independent and begin their own firms.
In addition to risk assessment within the insurance industry Actuaries also:
- Run financial models for financial institutions
- Assess asset values in divorce proceedings
- Provide expert testimony regarding lost wages in court
- Perform other complicated estimations of future value.
What Education is Required to Become an Actuary?
To successfully fulfill their duties, Actuaries utilize a combination of finance, business and statistics. Actuaries therefore need to be well-versed within these subjects, as demonstrated through a bachelor’s degree in Actuarial Science or another related field such as financial math or statistics. After a Bachelor’s degree, some opt for Post Graduate in Certified Risk & Insurance Management before pursuing their certification.
A new Actuary might have to first work an actuarial internship or rotate between various jobs at first in order to learn business of Actuarial Science and maximize their earning potential.
The Casualty Actuarial Society and the Society of Actuaries are the two organizations that issue the certifications to Actuaries for various operations. For a prospective Actuary, it is not essential to select a specialty until later in the process of certification.
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