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Actuaries are professionals who analyse the financial impact of risk, particularly looking ahead far into the future. Actuaries use skills in mathematics, economics, finance and statistics to study uncertain future events, especially those of concern to insurance companies, employee benefits such as medical insurance and pension plans, and social welfare programs such as social security and Medicare.
The main and classical functions of actuaries are to compute premiums for insurance and reserves. Reserves are similar to liabilities and indicate how much should be set aside now to provide for future payouts. If you inspect the balance sheet of an insurance company, you will find that the liability side consists mainly of reserves.
In some countries, becoming a fully certified actuary requires passing a rigorous series of exams, which takes several years, much of it after college and while working. For instance, in the U.S. the exams are given by the Society of Actuaries (www.soa.org) and the Casualty Actuarial Society (www.casact.org). These align with the two major branches of actuarial work. The first deals with life matters such as life insurance, annuities, pensions, disability and medical insurance. The second deals with property matters such as autos, homeowners, or commercial property insurance.
Usually an actuary's job will involve quantifying how much a sum of money or financial liability will be worth at different points in the future. Since this is not a deterministic process, stochastic models are used to determine a distribution and the parameters of the distribution.
Recently the scope of the actuarial field has widened to include investment advice, and even asset management.
Actuaries will typically be employed in insurance companies, consulting firms (i.e. firms that sell actuarial advice and analysis to other companies), or government departments, such as the Government Actuary's Department in the UK. Many belong to one or more professional bodies, which include:
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