Actuary
Actuaries are professionals who analyse the financial impact of risk, particularly looking ahead far into the future. Actuaries use skills in mathematics, economics and statistics to study uncertain future events, especially those of concern to insurance companies and pension schemes.
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, particularly consulting actuaries, have recently incurred disapproval following what some have termed the pensions crisis in Europe and the US. Many commentators have accused actuaries' methodologies for funding levels of being innately flawed, assuming as they do higher discount rates for equities than bonds. This assumption implies that less money needs to be put into a pension fund if it is heavily invested in equities. Conventional theory supports this view, as the higher risk of an equity investment should be compensated for by higher returns over the very long periods (up to 45 years) involved. A historical analysis supports this theory -- there have been very few sustained periods over the last hundred years or so when equities have not returned more than bonds. The current relatively poor performance of equities does not invalidate this analysis.
All actuarial bodies are currently going to some lengths to measure the efficacy of their members' asset allocation advice, and the realism of their funding assumptions. There is a feeling in some marketplaces that it is time for Financial and Legislative Authorities to pay closer attention to the dealings of actuaries, as there is a perception that actuaries have previously been practising an arcane science, understood by few.
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:
See also
