The definition of 'Actuary'
An actuary is a mathematically minded professional who focuses on risk assessment and management in industries where the level of uncertainty is extremely high. They use probability, financial theory, and computer science to model risk and determine the associated cost.
Actuaries are heavily trained and tested extensively before they can practice. While many actuaries come from mathematical degrees, there are other ways to become an actuary and a number of courses exist to prepare candidates for the required examines.
What does an actuary do?
In short, Actuaries evaluate complex risks and assess the potential financial implications of those risks. They use statistical data and computer modelling to determine how risky an activity is so that the can assign a value associated to it. For example, let’s say that a Rockstar what’s to be insured against falling off the stage. An actuary would use data they’ve collected around the probability of that event occurring, assign a clumsiness factor to the Rockstar (is s/he prone to accidents), and then try and understand the cost, in losses, that the Rockstar might incur should the event occur. The actuary then runs the data through a model they’ve created and spits out the insurance premium the company would need to charge that reflects the associated risk.
What skills do actuaries possess?
For starters, they possess excellent numeracy skills. They are often gifted mathematicians or have trained hard to become fluid in the techniques required for the role. They are also incredibly detailed oriented, capable of highlighting even the smallest of differences in data and patterns. They are keen researchers and have a high level of computer literacy. All of this combined makes them to be excellent problem solvers.
Where do they tend to work?
Insurance companies are legally obliged to employ at least one actuary to advise on financial management. Therefore, you will find them working for all different types of insurance companies in addition to pension funds, consultancies, healthcare providers, governments, accounting firms, investment banks, and many other organisations where there is a high level of risk associated with their product or service.
Actuaries in venture capital?
Actuaries are commonly employed to examine the risk of an investment in the financial world. However, they are often not employed directly by VCs but may be brought in for certain investment decisions. As they are often mathematically gifted, they could make very good venture capitalists, their analytical abilities applied to valuation negotiations and helping to highlight the potential risks the business will face in the future.
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