Types of employers
To understand the range of jobs in this sector, it is useful to first look at the types of institutions that employ actuaries. Further details are below, but the headlines are:
- Insurance companies and consultancies are the largest employers of actuaries, with close to 75% of the profession working for them.
- Life insurance and pensions are the largest practice areas that actuaries work in, accounting for nearly 50% of the profession.
These companies sell a range of insurance products to individuals and to businesses to help them manage a range of risks. Most insurance companies sell all three types of insurance: life, non-life (general) and health. As an actuary working for this type of company you will normally work with one of the specific insurance types as the skills and knowledge required to manage different products are specialised. You could find yourself in either a Life & Health Insurance team or the Non-life (General) Insurance team. Within each of these teams there is a range of work that actuaries do and the tasks are split broadly into Financial Reporting/Reserving, Capital Management and Pricing. Each of these areas requires deep technical knowledge and an understanding of the regulatory rules that govern insurance companies. As a result, it is common for actuaries to specialise further in one of these areas, though moving from one area to the other is common.
Reinsurance companies act to insure the risks of insurance companies. Rather than dealing with individuals, reinsurers normally work with large portfolios of life/non-life/health insurance liabilities. They are organised in much the same way that insurance companies are and the types of actuarial jobs are split in a similar fashion (reporting/capital/pricing).
There are very few “pure” actuarial consultancies, i.e. consultancies that offer only actuarial services. It is more common to see larger financial service consultancies that have specialised actuarial teams as part of their service offering. For example, the Big 4 accounting firms (see our briefing on Accountancy) all have specialised actuarial teams offering life insurance, non-life insurance, pensions and investment consulting services. There are also many smaller consultancies in the sector.
These consultancies provide services to a range of corporate clients which are typically insurance companies, pension schemes and investment banks. The type of work you do within a consultancy will depend on the area of specialism you have chosen to pursue, i.e. pension actuaries will work in pensions consulting teams whilst life insurance actuaries will work in life insurance consulting teams.
Investment & finance companies
There is a diverse range of institutions in this sector offering many types of products and services (see out briefing on Banking and Investment). Traditionally it has not been the domain of actuaries, but in recent decades the actuarial skill set has been recognised as valuable when making investment decisions. The types of employers include fund managers, investment banks, hedge funds and risk management firms. Actuaries work in middle-office and front-office teams and tend to do jobs that draw on their insurance and pensions expertise as well as their strong quantitative abilities.
There have been a growing number of actuaries working for ratings agencies in the last decade. As ratings agencies scrutinise the operations and financial positions of insurance companies, the actuarial skill-set has become very valuable in picking apart the rather sophisticated balance sheets of insurance companies. Actuaries working in rating agencies need strong investigative skills and also need to be able to apply their knowledge to a range of companies.
The role of the actuary in both the pensions and insurance sectors is a regulatory requirement. In much the same way that companies must publish their financial accounts each year and have them signed off by an auditor, insurance companies and pension schemes must also submit various actuarial reports that show their on-going financial condition. For regulatory bodies to manage the operations of insurance companies in a prudent manner, they require actuaries to help them develop their policies and also to ensure the insurance sector is working within the guidelines they set out. The Financial Services Authority (FSA) is the main UK regulator for insurance whilst the Government Actuaries Department (GAD) informs pensions-related policy.
As mentioned above the UK civil service includes the Government Actuary’s Department which recruits both trainees and qualified actuaries. The GAD advises government on significant policy initiatives where understanding and quantifying financial risks are critical elements of good decision-making. In particular it provides advice on pensions, student loans and risk-pooling arrangements such as those for clinical negligence claims, although it also undertakes a range of work across insurance and investment sectors (in the UK and internationally).
The career path for an actuarial student is relatively open and can incorporate an individual’s strengths and interests. It is possible to get a breadth of technical experience across different practice areas whilst completing the exams and then specialise once full qualification has been achieved. It is also possible to focus on one practice area throughout your whole career. Though it is perceived to be a very technical career choice, there are options to move away from purely technical work and take on roles that involve more people management, business development or broader operational management.
The actuarial skill set also travels very well internationally with different overseas actuarial bodies recognising UK qualifications. The UK has the oldest and most developed insurance sector in the world and many emerging markets are following the UK’s model of prudential supervision of insurance companies. As a result, UK actuaries are often seen to be at the forefront of actuarial development and are highly sought after.
Whatever area the qualified actuary moves into, the rewards are notable. Data on salaries published by the The Institute and Faculty of Actuaries indicates that the average starting salary for a student actuary is c. £33,000 to £36,000 depending on the number of exam passes they have. Newly-qualified actuaries can expect a salary of c. £50,000 or more. However, salaries for newly qualified actuaries in more specialist areas of work (such as the London Market or banking) can be significantly higher. Salaries well in excess of £100,000 are typical for senior actuaries. In general, salaries in consultancy are higher than in insurance companies.