Actuary accounting, or actuarial accounting, is the use of statistical analysis based on accounting systems. Because it's primarily used in the insurance business actuary accounting is often called insurance accounting. Actuary accounting is also used in the assessment of risks in financial investments, management of government regulated pension plans, and the creation of various financial products.


What is an Actuary Accountant?

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An actuary accountant is a statistician who uses accounting principles, financial theories, applied statistics, and mathematics formulas to generate the probability of a specific risk or event within a specific time frame for specific data sets. Actuaries analyze economics and other factors such as social data and use the statistics they glean to recommend solid financial decisions and perform risk assessment for an insurance company, private or public corporation, or government entity to minimize any negative financial impact.

Besides having excellent math skills including understanding statistics and statistical data, those in actuarial work should have a strong background in business, accounting, and computer science to prepare for an actuarial career.

Actuaries typically work in an office environment as part of a team that may include accounting managers, underwriters, market research analysts, and financial analysts. Consulting actuaries who work for consulting firms may have more flexible schedules that include traveling to client locations throughout the United States to lower their financial risks. In 2016 around one-third of actuaries reported working over 40 hours a week so there's a good chance overtime will be part of the job.

Depending on the industry, such as if they work for a health insurance or other insurance company, an actuary may be responsible for a wide range of duties. Here are some examples of the position might entail:

  • Compiling statistical data
  • Estimating the probability of a major event, such as one with significant fianncial impact or a life threatening illness if they are working on info for life insurance plans
  • Estimating likely finacial impact of a major event or possible return on investment
  • Using their analytical skills to design, test, and integrat business strategies in order to maximize profit and perform risk management functions
  • Create tables, reports, and charts in order to explain how they reached conclusions
  • Be relatively comfortable with public speaking so that they can clearly present and explain conclusions to government representatives as well as corporate executives, clients, and shareholders

Because the field uses specialized modeling and statistics software, actuaries are required to be adept with computers and may study and earn a minor or double major in computer science. In addition, because actuaries must be able to present their findings to their employer or clients they should be able to speak to both large and small groups. Training in both areas should be included in an actuary's formal education courses in order for them to be effective in their profession.

Where are Actuarial Accountants Needed by Industry?

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The majority of those with a degree in actuarial science are employed in the insurance industry, followed by financial, private companies or corporations in corporate finance positions, and government. Here's a look at each industry that employs actuarial accountants and what the typical job duties are:

Insurance: many actuaries are working for and holding positions with insurance carriers and specialize in one field of insurance. Here are the most common insurance fields where actuaries are employed:

  • Life insurance: Those in this actuarial profession analyze risk factors such as gender, age, and health habits in order to generate life expectancy tables used to develop a life insurance and annuity policy for a group or an individual.
  • Property and casualty insurance: Thos who do this actuarial work determine the projected number of claims by analyzing driving history, vehicle, age, gender, and other factors in order to develop insurance policies and make sure insurance companies don't pay out more than they take in with their products. Actuaries can specialize within this field of employment by focusing on natural disasters, fires, home accidents, and vehicular accidents.
  • Health insurance: Actuaries develop both health insurance and long-term care policies and costs by analyzing factors such as occupation, location of residence, and family history as well as age, gender, and a number of health habits.

Financial: In the financial sector, actuaries may also specialize in one area of work within the actuarial field. Here are some common areas actuarial accountants might focus on in the financial field:

  • Investment strategy projections
  • Risk management

Private companies or corporations: actuaries employed by private companies or corporations may also be tasked with investment strategy and risk management projections but are usually focused on one of the three following areas.

  • Retirement benefits and pension benefits projections: evaluate, design, and test pension plans to determine what funds must be on hand in the future to ensure payments.
  • Retirement plans and health care plans for retired employees; retirement planning for individuals.
  • Enterprise risk actuaries: These specialists identify risks that may affect a company's long-term or short-term goals such as financial, geopolitical, or economic factors. They analyze the statistical risks and help management develop strategies to counter the risks involved by giving sound advice to management.

Government employed actuaries may work in the following specialized areas:

  • Conduct demographic or economic studies to determine future benefit obligations for Medicare or Social Security
  • Analyze proposed changes to Medicare or Social Security
  • Analyze rates and fees charged by insurance carriers

Some actuaries work for consulting firms and are contracted out to clients such as insurance companies and other businesses that aren't large enough to employ an actuary full-time. These positions may frequently require travel to various client locations.

What Education is Needed?

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To become an actuary, you'll need to earn at least an undergraduate degree from an accredited school. Actuary science, statistics, mathematics, and similar analytic fields are typical but not required. You'll also need to pass a series of difficult exams to become certified, so you should plan your education with this in mind. You'll need courses in economics, corporate finance, and applied statistics as well as a strong knowledge base in computer science. Here are the core courses you should plan on taking:

  • macroeconomics
  • microeconomics
  • finance
  • two semesters of corporate finance
  • three semesters of calculus
  • two semesters of calculus-based probability and statistics
  • one semester of linear algebra
  • two semesters economics
  • computer science
  • actuarial science courses
  • business courses
  • marketing
  • speech
  • business writing
  • technical writing

In the computer science sector, you should focus on programming languages as well as learning how to use and develop databases, spreadsheets, and statistical analysis programs. Because part of your job will be to present your findings to management and clients you should develop clear public speaking tools as well as report writing and the ability to simplify and present charts, graphs, and other data you develop.

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Validation by Educational Experience (VEE):

Professional certification in actuarial science is offered from two groups: the Society of Actuaries (SOA) and the Casualty Actuarial Society (CAS). CAS certifies actuaries in property and casualty insurance, while SOA offers the Certfied Actuary Analyst Credential. Whichever you earn, yo'll need to earn continuing education coursework in order to maintain them from year to year. That might give you the perfect opportunity to earn a graduate degree if you haven't yet.

the two major certifications for actuaries both require you to have education credits in the following subjects; once you pass the preliminary certification actuarial exams you may apply to have the VEE credits added to your record. Here are the courses you're required to take before certification:

  • Applied Statistical Methods
  • Corporate Finance
  • Economics
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Internships:

although an internship is not required for certification or guarantee future employment, an internship does give you advantages in your field of choice. Here are some of the benefits of actuary internships:

  • Building hands-on skills with basic tasks
  • Relevant work experience, which may earn you a higher salary when you're hired on
  • Sharpening actuary skills and communication skills with real work experience
  • Increased exposure to potential employers
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Financial assistance:

there are quite a few scholarships and grants available for actuarial students both on the undergraduate and graduate levels. Career counselors and colleges can help you find financial assistance as can actuarial companies, clubs, and professional organizations.

Certification

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While you don't need a degree in actuarial sciences to work as an actuary you are required to be certified. There are two major actuary certifications in the U.S. and depending on your chosen specialty you should plan your coursework with the end goal of earning at least one of these certificates: The Casualty Actuarial Society (CAS) or the Society of Actuaries (SOA). If your goal is to work for the government, the IRS awards the IRS Enrolled Actuary designation, but it is based on experience rather than exams. Here's a look at each certificate:

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Casualty Actuarial Society (CAS):

The CAS is a professional society specializing in property and casualty insurance. CAS has two steps in the certification process: associate and fellowship. Once you earn your associate certification you must have a few years of working experience before you can earn your fellowship certification through the CAS.

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ACAS

Here are the preliminary exams you'll need to pass to become a certified Associate (ACAS):

  • Probability Exam
  • Financial Mathematics Exam
  • Models for Financial Mathematics Exam
  • Constructing and Evaluation of Actuarial Models Exam
  • Statistics and Probabilistic Models Exam
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FCAS

To become a fully certified Fellow (FCAS) you'll need to pass the following exam subjects:

  • Statistics and Probabilistic Models
  • Basic Techniques for Ratemaking and Estimating Claim Liabilities
  • Nation-Specific Examination: Regulation and Financial Reporting
  • Estimation of Policy Liabilities, Insurance Company Valuation, and Enterprise Risk Management
  • Advanced Ratemaking
  • Financial Risk and Rate of Return
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SOA

Society of Actuaries (SOA): the SOA is the certification organization for actuaries from all major areas of practice except property and casualty insurance. If you plan to become an actuary specializing in pensions, finance, life, health, or investments this is the certification you will work for.

Society of Actuaries (SOA) requirements: the SOA also certifies with a two-level exams process and also calls the levels Associate and Fellow.

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ASA

Here are the preliminary exam subjects you'll need to master to become a certified Associate (ASA):

  • Statistics
  • Probability
  • Life contingencies
  • Interest theory
  • Risk models
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FAP

After you pass the preliminary exams you'll be required to take the Fundamentals of Actuarial Practice (FAP) which is a series of online learning modules that cover insurance and professionalism case studies, projects, and readings. Once you've finished the FAP requirement you will receive the ASA designation.

  • Upper-level (Fellowship) exam topics to earn the FSA certification:
  • Plan design
  • Risk classification
  • Enterprise risk management
  • Ratemaking
  • Valuation

There are six specializations to choose from on the Fellowship track and you must pass three exams of your choice:

  • Finance & Enterprise Risk Management
  • Investments
  • Individual Life Insurance & Annuities
  • Retirement Benefits
  • Group & Health Insurance
  • General Insurance

If you choose (and pass) the Finance & Enterprise Risk Management, you will also earn the CERA designation.

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IRS Enrolled Actuary

To be designated an IRS Enrolled Actuary you must have an actuary or statistics bachelor's degree and at least 36 months of pension plan experience, or 60 months of total actuarial experience including at least 18 months of pension plan experience.

What is the Job and Salary Outlook?

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The job outlook for actuaries is excellent with a projected growth of 22 percent between now and the year 2026. That being said, it is a specialized field, so the actual job openings are projected to be approximately 5,300. The following states project the highest need for future actuaries:

  • New York
  • California
  • Pennsylvania
  • Texas
  • Illinois

Actuaries will be needed in the growing area of enterprise risk management as companies begin to analyze and manage their own financial risks in various areas of business operations in response to new economic requirements and regulations.

Health insurance companies will be hiring actuaries in response to changing healthcare guidelines and regulations and to address new products and markets as the baby boomer generation retires.

Other insurance industries will also be hiring actuaries to analyze consumer information in the property and medical data fields. As available data increases insurance companies can use it to predict consumer trends, keep their prices competitive, develop new products, and project future costs and risks.

According to the Bureau of Labor Statistics (BLS) in May 2017 the median annual wage for actuaries was $101,560. The highest 10 percent in the field earned $184,770 and the lowest 10 percent earned $59,950. The large discrepancy between the lowest and highest paid is most likely due to the difference in education as well as experience as well as the metropolitan area where the actuary is employed. A full 25 percent of actuaries hold master's degrees and an additional 10 percent hold a Doctorate or professional degree while 62 percent hold the minimum required bachelor's degree. Learn more about accounting related salaries here.

Because the number of applicants sitting for actuary exams has increased job opportunities will remain competitive. Those who hold a master's degree or higher and have passed a minimum of two actuary exams will be the most sought-after employees, and those with experience will be posed to earn a much higher salary than those just beginning in the field. Although passing the CPA exam is not a requirement for actuaries many do hold the credential as it is the most respected and recognized in the field of actuarial accounting. Students should plan to work an actuary internship and excel in business and analytical skills in order to have the best entry-level positions.

Actuarial Accountant Salary by States and Major Cities

Average Actuarial Accountant Salary: $94,000

City Annual Median Wage
Birmingham $61,600
City Annual Median Wage
Anchorage $55,100
City Annual Median Wage
Scottsdale $76,000
City Annual Median Wage
Little Rock $82,000
City Annual Median Wage
San Francisco $116,000
Oakland -
Los Angeles $91,000
San Diego $81,700
Sacramento $76,500
City Annual Median Wage
Denver $107,400
City Annual Median Wage
Bridgeport -
Hartford $125,000
Danbury $87,000
Waterbury -
City Annual Median Wage
Wilmington $107,000
Camden -
City Annual Median Wage
Washington DC $80,700
City Annual Median Wage
Boca Raton $80,000
Fort Lauderdale $100,000
Tampa $80,000
Miami $47,500
Orlando $98,500
Tallahassee $50,100
Jacksonville $88,000
City Annual Median Wage
Atlanta $94,900
Chattanooga $130,000
City Annual Median Wage
Bloomington $72,200
Chicago $90,000
Naperville $121,900
City Annual Median Wage
Indianapolis $68,300
City Annual Median Wage
Des Moines $110,000
Omaha $86,000
City Annual Median Wage
Wichita -
Topeka $52,400
Kansas City $160,000
City Annual Median Wage
Lexington $64,100
Owensboro -
Elizabethtown -
City Annual Median Wage
Portland $54,500
City Annual Median Wage
Baltimore $73,200
Salisbury $53,000
City Annual Median Wage
Boston $114,500
Worcester $97,700
City Annual Median Wage
Detroit $50,200
Lansing $60,000
Grand Rapids $70,000
Warren -
City Annual Median Wage
Minneapolis $89,200
City Annual Median Wage
Jackson $65,500
City Annual Median Wage
Kansas City $60,700
St. Louis $94,800
City Annual Median Wage
Omaha $86,000
City Annual Median Wage
Las Vegas -
City Annual Median Wage
Nashua $75,000
City Annual Median Wage
Atlantic City -
Camden -
Newark $70,000
Trenton $64,000
City Annual Median Wage
Albany $63,500
New York $105,600
Utica -
City Annual Median Wage
Charlotte $100,000
Concord -
Greensboro $93,900
High Point $57,000
City Annual Median Wage
Akron $89,300
Cincinnati $60,000
Cleveland $88,500
Columbus $83,600
Dayton $55,000
City Annual Median Wage
Portland $124,800
City Annual Median Wage
Harrisburg $58,300
Montgomery County -
Philadelphia $101,000
Pittsburgh $82,000
City Annual Median Wage
Providence $60,400
City Annual Median Wage
Austin $87,400
Fort Worth $60,000
Dallas $77,800
Houston $68,900
San Antonio $67,000
City Annual Median Wage
Salt Lake City $85,000
City Annual Median Wage
Burlington -
Montpelier $123,000
City Annual Median Wage
Richmond $78,200
City Annual Median Wage
Seattle $92,200
Bellevue $73,700
Everett -
City Annual Median Wage
Appleton $51,900
Madison $78,200
Milwaukee $64,000
Green Bay -
**Salary info from BLS and Payscale

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