About Actuarial Activity
Actuary means a person who has certain qualification for measuring
risks and probabilities and who applies his skills to handling the problems of
business and finance, especially in relation to such areas as insurance
and demography, connected to casual events.
Government Actuary of Great Britain К. Daykin
Actuary who is just an actuary is not an actuary
F.Redington, British Actuary
Actuaries are versatile specialists – analysts who have good theoretical background and the applied skills in such sciences as mathematics, statistics, economics, demograhy, theory of probability, and finance. Such analytical and practical knowledge is used in financial modelling with account of stochastic social factors that allow them anticipating and solving economic and social challenges of corporate financial institutes. Based on the collected statistics, with the help of computer-programmed mathematical models, actuaries make short- and long-range financial projections by widely using risk management techniques. In other words, actuaries provide top-managers with the analytical substantiations and assessments of after-effects that potential decisions could have. However, if a project fails it’s the actuaries who have to provide a practical solution for the way out with minimal losses.
The word actuary originated from the Latin word actuarius. The person who occupied this position kept the minutes at the sessions of the Senate in the Ancient Rome. This word, however, had lost its clerical meaning and since the end of the 18th century has been continuously related with the insurance business. The origin of the actuarial profession itself, in its present-day sense, is associated with the emergence of the first life insurance companies when the need to compute premiums on a truly scientifc basis came out. The first actuarial firm, in its contemporary meaning, appeared in Great Britain in 1762. In succeeding years, market needs were conductive to the continuous increase in the number of such firms. The logical completion of the process was the understanding of the need to establish a professional organization of actuaries. That’s how the Institute of Actuaries appeared in London (1848) and the Faculty of Actuaries – in Edinburgh (1856). Their main objectives were formulated as the facilitation in developing the theory and practice of the actuarial business, improving the process of providing information to actuaries including also the component of statistics for qualified computations. The realization of importance of governmental acts concerning insurance and retirement security that would govern and regulate this sphere of public relations.
The actuarial profession is insofar more influential abroad than in this country. For instance, this job is considered prestigious and honorable in the US and is at the top level in the rating of professions. Nonetheless, institutions in Kazakhstan also show their interest in such professionals. In our country actuaries are mostly wanted in such institutions as insurance companies, banks and pension funds.
The Law “On the Insurance Activity” which was enforced on January 1, 2001 and which introduced new standards of accounting and financial reporting by insurance organizations and the principles and standards under which the insurance market is organized in line with the international standards, instituted the profession of an actuary in Kazakhstan. Under the Law, each insurance (reinsurance) organization should have insurance reserves, and loss ratio on all lines of insurance computed by a licensed actuary. According to the Law, a natural person who has a license for carrying out actuarial activity granted by the National Bank of Kazakhstan can serve as an actuary.
The objective of the actuarial activity is to make economic and mathematical computations of the amounts of liabilities arising from the insurance (reinsurance) contracts to ensure the appropriate level of financial sustainability and solvency of an insurance (reinsurance) organization.
Actuaries have to answer the questions typical for managers of insurance companies. For instance, how much the insurance premium should be reduced which is paid to get rid of the risk when there is a franchise – a loss not coverable by the insurance company? What is the optimal level of risk transferred by an insurer to a reuinsurer, with account of reinsurance cost in the event of significant risks? Actuaries know the answers to these and many other questions. Actuaries play an essential role in determining the rate-making policy of an insurance organization or a non-government pension fund, assess the values of securities portfolios or contractual financial obligations. Actuaries may help the managers of a financial enterprise in estimating various personnel expenditures, besides the payroll. Actuarial forecasts allow preventing liquidity crises or, in other words, the lack of spare resources for making payments. Actuaries, by virtue of their fundamental financial background, would easily cope with the computation of anticipated profit, efficiency and payback periods of any financial projects taking acccount of basic macroeconomic indicators, such as inflation. The actuarial activity is interesting from the standpoint that it is at the turn of human resources management, financial computations and book-keeping, an actuary being in close contacts with the experts in those allied professions.
At present those people who have studied at the university or undergone other appropriate training, have passed the exams and are formal members of some national professional organization of actuaries (such as British Institute of Actuaries, Society of Actuiaries in the US and Canada, Association of Actuaries in Finland) are referred to as actuaries.
In 1895 national professional societies of actuaries in Belgium, France, Germany, Great Britain and the United States established the International Actuarial Association - IAA, which is based in Brussels and conducts its Congresses once in four years (regular, 30th International Congress of Actuaries was conducted in March – April 2014 in Washington). One of the traditions existing at the international congresses of actuaries is to give an opportunity to all national societies to inform the actuarial community of their structure, functioning, challenges in the actuarial science and practice or provide interesting statistical data. Congresses have an extensive scientific program that attracts both the representatives of the pure science and its applications.
To become a full-fledged IAA member, a national association of actuaries should meet the following requirements:
1. should be legally registered as a professional society in that country;
2. should introduce the code of conduct complying with the requirements of the European Actuarial Consulting Group (an organization which unites European associations of actuaries);
3. should have an adequate procedure for dealing with complaints and complying with the code of conduct;
4. actuarial training provided according to the IAA basic list of disciplines and the requirements to those individuals who started joining the IAA as full-fledged members;
5. payment of annual membership fees.