Duhaime's Law Dictionary


Actuary Definition:

Professionals uniquely skilled in the application of mathematics to risk management, contingent events and opportunity.

Professional business people who are skilled in the application of mathematics to risk management and contingent events.

In Champagne v Unity Industrial Life Insurance Company, Justice Westerfield of the Court of Appeal of Louisiana sitting at New Orleans adopted these words to define an actuary:

"One whose profession it is to calculate insurance risks and premiums; a person skilled in the theories and mathematical problems involved in making these calculations."

According to the Institute of Actuaries of India:

"Actuaries are experts in assessing the financial impact of tomorrow's uncertain events. They enable financial decisions to be made with more confidence by analyzing the past, modelling the future, assessing the risks involved, and communicating what the results mean in financial terms."

The Institute and Faculty of Actuaries of the United Kingdom (established in 1848), describes an actuary as follows:

"Actuaries apply financial and statistical theories to solve real business problems. In effect, they use their skills in maths and statistics to create theoretical models of the world around them. A typical business problem might involve analysing future financial events, especially when the amount or timing of a payment is uncertain....

"Actuaries' skills are in great demand throughout the financial sector, particularly in investment, insurance and pensions....

"An important advance came in 1662 from a surprising source, a London draper called John Graunt. By analysing the London Bills of Mortality, he showed that there were regularities in the patterns of life and death in a group of people, despite uncertainty about the future lifetime of only one person. His famous life table showed how many of every 100 babies survived until ages 6, 16, 26, 36, 46 and so on.

"It now became possible for the first time to envisage setting up an insurance scheme providing life assurance or pensions for a group of people, where it could be worked out how much money each person in the group should contribute to a common fund assumed to earn a fixed rate of interest. The first person to demonstrate publicly how this could be done was Edmond Halley, the famous mathematician and astronomer, after whom the comet is named. Halley analysed data relating to births and deaths in the German City of Breslau to construct his own life table in 1693 (for individual ages, not just age groups), which was found to give a reasonably accurate picture of survival and became well known throughout Europe."

actuaryIn 2012, the American Society of Actuariues defined their profession as follows:

"An actuary is a business professional who analyzes the financial consequences of risk. Actuaries use mathematics, statistics and financial theory to study uncertain future events, especially those of concern to insurance and pension programs. They evaluate the likelihood of those events, design creative ways to reduce the likelihood and decrease the impact of adverse events that actually do occur.... The majority of actuaries work within the insurance industry."

"The profession's heritage in North America, then of about 80 years duration, had been built upon European foundations dating back to the establishment of probability theory in the mid–seventeenth century, to Edmond Halley's 1693 mortality table, to James Dodson's pioneer work on the level premium system that led to formation of the Society for Equitable Assurances on Lives and Survivorship in London in 1762, and to Richard Price's textbook on life contingencies first published in 1771.

"The first company actuary to practice in North America was Jacob Shoemaker of Philadelphia, a key organizer in 1809 of the Pennsylvania Company for Insurances on Lives and Granting Annuities who chose to be that company's actuary rather than its president."

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