An actuary is a specialist who uses mathematics, statistics and financial theory to assess risks and future obligations. In insurance, premiums, reserves and ultimately the company's ability to keep its promises to clients depend on their calculations.

What an actuary does

  • Pricing. Based on loss statistics, the actuary determines how much cover should cost to pay for expected claims and expenses.
  • Valuing insurance reserves. The company must hold funds for future payments — including for events that have already happened but have not yet been reported. The actuary determines the size of the reserves.
  • Life insurance and pension programmes. Here calculations are based on mortality tables, rates of return and contract terms spanning decades.
  • Reinsurance and capital management. The actuary assesses what part of the risk to retain and what to pass on to reinsurance.
  • Analysis of new products. Before launching a product, the company tests its resilience to adverse scenarios.

Legal framework in Russia

The profession is governed by Federal Law No. 293-FZ of 2 November 2013 "On Actuarial Activity in the Russian Federation". The law defines actuarial activity, who may be an actuary, which organisations must undergo actuarial valuation and how oversight is organised.

Responsible actuary

The law establishes the role of the responsible actuary — a specialist entitled to carry out mandatory actuarial valuation and sign opinions. Information on responsible actuaries is entered in a single register maintained by the Bank of Russia. To be included, one must meet the requirements of the law, including passing certification and being a member of a self-regulatory organisation (SRO) of actuaries.

Mandatory actuarial valuation

Insurance organisations must carry out an actuarial valuation of their obligations every year. The result is set out in an actuarial opinion submitted to the Bank of Russia. In it, the responsible actuary assesses the adequacy of insurance reserves and other indicators related to the company's obligations. A similar requirement applies to non-state pension funds.

Standards and self-regulation

Actuaries work according to federal standards of actuarial activity. The profession is based on self-regulation: actuaries join self-regulatory organisations, which develop rules, monitor the quality of their members' work and consider complaints. The Bank of Russia supervises actuarial SROs. Internationally, professional associations of actuaries from different countries are members of the International Actuarial Association (IAA).

Why this matters to policyholders

Clients rarely see an actuary's work, but they feel its effects:

  • A fair price. An actuarially sound premium reflects the real risk. A policy that is too cheap may mean the company has underestimated losses — and will run into problems with payments.
  • Reliability. Adequate reserves are the main guarantee that money for claims will be there. This is exactly what the actuarial valuation checks.
  • Clear coefficients. For example, in OSAGO (compulsory motor third-party liability insurance) the price consists of a base rate and coefficients (territory, bonus-malus, age and driving experience, engine power, etc.). Each of them is backed by actuarial statistics.

How to become an actuary

The path into the profession usually starts with a degree in mathematics or economics. Then come specialised courses in actuarial mathematics, life and non-life insurance and financial reporting. Working as a responsible actuary requires experience, certification and SRO membership. Specialists are in demand at insurance companies, reinsurers, pension funds, banks and consulting firms.

Related terms

  • Premium rate — the price of insurance per unit of sum insured.
  • Net rate — the part of the premium intended for claims payments.
  • Loading — the part of the premium covering the insurer's expenses and profit.
  • Insurance reserves — funds set aside for future obligations.
  • Loss ratio — losses divided by earned premium.

More definitions are in the glossary of insurance terms. Reliability ratings and the data in the insurance company catalogue help assess a particular insurer's financial stability.