Role of Actuaries in Insurance
Actuaries are professionals in the insurance industry that analyze and quantify the impact of various forms of risk, mathematically determining the likelihood of losses and working to mitigate their impact. Actuaries are employed in a number of insurance areas, including life insurance, property insurance and regulation.
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Ratemaking
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Traditional employment for actuaries includes the ratemaking aspect of insurance. Ratemaking is the process by which actuaries statistically determine the likelihood (frequency) and size (severity) of losses by their company's policyholders and determine rates that will earn the insurance company enough money to pay future claims and make a profit.
Reserving
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Reserving is an important consideration in both life insurance and property insurance. Reserving is the process performed by an actuary to mathematically determine the amount of money his insurance company must have on hand to pay future claims.
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Insurance Regulator
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Each of the 50 states has its own Department of Insurance that handles regulation within the insurance industry. Typically, actuaries fill these roles to provide oversight of the insurance industry. Actuaries acting as regulators will review proposed rated and reserves for insurance companies to ensure that they are reasonable.
Reinsurance
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A number of actuaries also have important roles within reinsurance. Reinsurance is insurance for an insurance company and is used in an effort to diversify the company's risk to avoid bankruptcy. Actuaries in reinsurance perform similar ratemaking and reserving functions, but much more complicated.
Risk Management
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Although less traditional than ratemaking or reserving, many actuaries work in insurance in a risk management role. In these types of roles, an actuary gauges the risks of her organization and works to limit the downside involved in these risks while maximizing the potential for profit. The main concern of a risk management actuary is the solvency of his company.
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