The Actuarial Science And Risk Management – Career Landscape

The recent trend in the widely-coveted jobs market has been an increasing interest in actuarial science and risk management. Every industry or company is confronted with the challenge of handling big unstable numbers and thus, the need for professionals who can predict and supposedly control these numbers is direly felt. BeAnAcruary.org has gone as far as proclaiming an actuary as “part super-hero, part fortune-teller, part trusted advisor.” Since actuaries and risk managers today are so important for the financial analysis of every project, company or venture, they are highly revered and substantially remunerated.

What Exactly Is An Actuary And What Do They Do?

Actuaries are professionals with the ability to assess and manage risks, by applying analytical and statistical techniques to predict the likelihood and outcome of uncertain ventures, particularly in the financial sector. Actuaries are ‘risk experts’ or ‘risk managers’ who are able to analyze future or contingent risks and quantify the monetary impact that such risks cast on the company’s financial health. In addition, they are expected to chart a solution for combating these risks. Even though the role of an actuary is important in most industries today be it healthcare for matters regarding social insurance or population projections or environmental financial planning, or even sales and price projections, actuarial science is most applicable to the risk management and financial planning industry, especially insurance companies.

Skills And Educational Requirements

Technical Or Functional Skills
A major part of an actuary’s job involves speculating and manipulating numbers using predictive data analytics and complex statistical tools, therefore a genuine mathematical and technical interest is an ideal prerequisite for any individual considering actuarial science as a career. Job seekers are required to have specialized mathematical knowledge especially in calculus, statistics and probability and also have deep analytical, project management and problem-solving skills to be able to foresee future outcomes and devise strategies to minimize or mitigate any risks. Actuaries are generally exposed to complex statistical analytics programs, database manipulation programs and programming languages, so strong computer skills are a basic requirement for any actuarial job. Technical understanding of spreadsheet formulation software including Excel and Access can prove handy as well. Employers today are also stressing on skills such as SQL and programming languages like VBA or C++.

Soft Skills
Actuaries need to convey their ideas and solutions to non-specialists like company managers and officials or project leaders, so having efficient communication skills will be an asset. Even though the work of an actuary is mostly technical, they should also have a good business sense and a basic understanding of accountancy, economics, and finance to be able to take decisions regarding costs, prices and profits. Actuaries have an almost fiduciary responsibility towards the company, it is thus imperative that they maintain a certain degree of independence in order to propose unbiased and frank solutions to company problems. Actuaries should also be curious and keep abreast with all industry related as well as financial and legal matters of significance to the company, to be able to make well-informed decisions and find creative solutions.

As far as education is concerned, actuaries usually pursue a bachelor’s degree in any quantitative area of study, which could be:

  • Actuarial Science
  • Computer Science
  • Economics
  • Engineering
  • Finance
  • Management Information Systems (MIS)
  • Mathematics
  • Physics
  • Statistics

However, the most important criterion to become an actuary is essentially exam progress, so it is not unusual for liberal arts students who have the mathematical and technical acumen to pursue actuarial science as a career too.

Actuarial Credentialing And Exams

Individuals need to pass a series of exams before they can be recognized as an accredited actuary. Exams can be taken within a university setting while pursuing undergraduate or postgraduate studies or alongside years of employment post undergraduate studies.

USA
There are two main administrations that govern the credentialing and examinations for actuaries in the US- Society of Actuaries or SOA (for life, health, and pension actuaries) and Casualty Actuarial Society or CAS (for property-casualty actuaries). You can become a CERA (Chartered Enterprise Risk Analyst) by becoming a fellow of either SOA or CAS.
To become an associate in SOA, individuals need to pass 5 preliminary exams and showcase validation by educational experience (VEE) in subjects like economics, corporate finance and applied statistics through an 8 module self-learning series and a professionalism course (SOA 2012a). For becoming a fellow, three or four other modules (depending on your specialization) have to be completed along with a fellowship admission course (SOA 2012c).

To become an associate at CAS, you need to complete 7 exams, 2 modules, and VEEs in economics and corporate finance. For fellowship, you have to pass 3 other exams along with completing a professional course (CAS 2011a). In both cases, there are certain examination exemptions allowed to individuals who want to become fellows, if they have completed specified requirements.
The SOA also has a system for accrediting universities and recognizing the best actuarial schools as Centers for Actuarial Excellence or CAEs. The CAE program recognizes universities and colleges with actuarial programs (UCAP) that are outstanding and credible enough to compete for grants relating to actuarial education and research.

UK
You have to enroll and become members of Institute and Faculty of Actuaries or IFOA before taking any actuarial exams. IFOA prescribes a series of 15 exams, split into 4 sections- Core Technical (CT), Core Applications (CA), Specialist Technical (ST) and Specialist Applications (SA). To gain the status of Fellow of the Institute of Actuaries (FIA) or of Fellow of the Faculty of Actuaries (FFA), individuals should have at least 3 years of actuarial work experience under the supervision of any recognized actuary. After becoming a fellow, you are designated as a Certified Actuarial Analyst or CAA.

Work Experience

As a student or beginner, strive for at least two actuarial internships in different fields like traditional insurance, consultancy, property or casualty. This will not only enable you to get practical knowledge of diverse sectors but also help you ascertain which field to specialize in for your fellowship. Exams are an important criteria for employment but internship experiences are just as significant. For full-time employment at an entry-level position, you have to pass at least two exams and have one or two internship experiences. Having passed a number of exams can help strengthen your knowledge of actuarial work, however, passing more than three exams without any work experience is usually not the norm. Excellent academic record and advanced technical knowledge of software and languages like Excel, Access, C++, VBA etc. can also prove to be the edge for gaining desirable job offers.

Specialist actuarial firms or professional service companies also encourage employees to take more exams by providing incentives like bonuses, study leaves, increased salary or responsibilities etc. to those who successfully pass the exams. Individuals should also be mindful of any legal requirements that need to be fulfilled before they can start practicing as a full-time actuary. For instance, in America, only members of the American Academy of Actuaries can sign certain actuarial documents. You should also stay connected with important industry associations and join local chapters wherever possible to stay updated with any new developments or changes in actuarial practices. Some of the major associations for actuaries in America include:
Society of Actuaries
Casualty Actuarial Society
American Academy of Actuaries
American Society of Pension Professionals & Actuaries
Conference of Consulting Actuaries

Career Path

As you gain experience and pass more exams, you will also have the option to pursue technical specialization in one or more fields– be it banking, consulting, ERM, insurance, wealth management, asset management etc. Trainees traditionally progress to technical roles like actuary to Appraiser to Claims Investigator and Loss Adjuster and eventually to more operational and company leadership roles like Risk Manager, People Manager or Technical Manager. The growth trajectory for an individual in any actuarial company directly depends on the number of exams the individual has passed and the number of years of experience they have. Reed.com has proclaimed that Actuary is one of the top five careers with excellent career progression opportunities.
The most popular and high-worth actuarial employers include Humana, Inc., Metropolitan Life Insurance Company (MetLife), American International Group, Inc. (AIG), New York Life Insurance Company, and Towers Watson, Milliman, Mercer LLC, ACE group, Prudential, AON Corporation etc.

Remuneration

According to Payscale.com actuaries in the United States earn an average of $83K annually. Depending on the bonus pay which can sometimes be as high as $29K, the cash compensation for actuaries can range between $50K to $160K. The remuneration is also directly proportional to the years of experience that an actuary has. Entry level positions, with 0-5 years experience, command about $65000 but highly experienced actuaries in their late career, with greater than 20 year’s experience, can command whopping salaries as high as $148000.

Actuarial science is a good career option for individuals with a keen interest towards math and stats and those who feel a passion for numericals. If you have the right skills and adequate knowledge and are able to target the organizations that not only support but also encourage actuarial progress, actuarial science could be the best career option for you.

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