Actuary

A finance professional who analyzes risk and the costs associated with risks and uncertainty

What is an Actuary?

An actuary essentially acts as the backbone of financial security for insurance companies, multinational corporations, and financial planners. The primary job of an actuary is to analyze risk and the costs associated with risks and uncertainty. For this, an actuary’s primary tools include advanced mathematics, statistics, and financial theories. Their duties are to protect organizations from uncertain events and losses by understanding the negative events and estimating the probability of its occurrence. Their role is to assess compiled data by applying complex statistical tools and design insurance policies, pension plans and investment proposals with proper explanations for their calculations and proposals.

 

Actuary - an actuary has his computer

 

About 71% of actuaries work in the finance and insurance sectors. A majority of this 71% is in the insurance sector. Here, they play a key role in policy making and with advanced knowledge of probability, they determine the insurance premiums to be charged for different policies. They generally tend to specialize in a field of insurance, such as health insurance, life insurance, pension and retirement benefits, property and casualty insurance, and enterprise risk. A small proportion of actuaries also work in the public sector, where they conduct demographic research and analysis and assist in the formation of welfare schemes.

 

How to become an actuary?

Actuaries require aptitude in mathematics, statistics, and finance. In India, one can enroll with the Institute of Actuaries of India after completing their higher secondary education and take the exams just like any other professional course that is pursued with a bachelor’s degree.

At the very outset, every actuary aspirant must appear for Actuarial Common Entrance Test (ACET), which tests students on mathematics, statistics, data interpretation, English and logical reasoning. After securing a pass percentage in this entrance exam, students can appear for the IAI Actuarial Exams, which are divided into two categories – written and practical and four stages – Core Technical (CT), Core Application (CA), Specialist Technical (ST), and Specialist Application (SA).

 

Core Technical

The Core Technical stage consists of 9 papers, CT 1-9, out of which CT 1-8 are written papers and CT 9 is a practical paper. The subjects include financial mathematics, finance and financial reporting, probability and mathematical statistics, models, general insurance, life and health contingencies, statistical methods, business economics, financial economics, and business awareness. Students can appear for the papers in any random order, three papers at a time.

 

Core Application

The Core Application stage consists of 3 papers, CA 1-3, where CA 1 is a written paper and CA 2 and 3 are practical papers covering actuarial risk management, model documentation analysis and reports, and communication respectively.

 

Specialist Technical

The Specialist Technical stage builds upon the Core Application stage. Here, a choice is introduced and students need to choose two subjects to specialize in out of six choices offered. The choices provided are health and care, life insurance, pension and other employment benefits, finance and investment, general insurance reserving and capital modeling, and enterprise risk management.

 

Specialist Application

The final stage (Specialist Application – SA) of the actuarial exams conducted by IAI requires students to choose one specialization out of the same abovementioned options. There is no requirement to clear the corresponding Specialist Technical paper but for example, appearing for SA 1 – Health and Care paper would assume knowledge of the ST 1 – Health and Care curriculum.

The Institute of Actuaries of India also provides exemptions in CA, CT, and ST papers to students who fulfill certain specified eligibility criteria. These exemptions can be duly claimed upon presenting the necessary documents, which confirm that the student has met the benchmark criteria. For example, exemptions are granted upon clearing exams from the Casualty Actuarial Society, Indian Statistical Institute, or the Institute and Faculty of Actuaries.

 

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