What Does an Investment Actuary Do?

K. Reynolds

An investment actuary is a financial professional who is responsible for analyzing various business risks and interpreting the negative effects these risks can have on the financial health of a company. Typically, investment actuaries operate within the insurance industry and will combine mathematical analysis and statistics with demographic data in order to determine the financial risk of insurance products, such as life insurance and retirement pension plans. Upon completing a risk analysis, investment actuaries will create strategic solutions to minimize risk and maximize growth. In addition to analyzing risk, an investment actuary is also responsible for determining the financial stability of companies that generate a large portion of their revenue through investment income.

Investment actuaries find solutions to minimize risk and maximize growth.
Investment actuaries find solutions to minimize risk and maximize growth.

Within the insurance industry, the main role of an investment actuary is to oversee and manage the investment risk strategies of multiple companies. There are a multitude of government regulations that require insurance companies to maintain a conservative investment strategy over a long-term investment horizon. To accomplish this, an experienced investment actuary will advise insurance companies on how to implement strategies that minimize risk and maximize the returns of their investment portfolio.

Within the insurance industry, the main role of an investment actuary is to oversee and manage the investment risk strategies of multiple companies.
Within the insurance industry, the main role of an investment actuary is to oversee and manage the investment risk strategies of multiple companies.

Investment actuaries also play a major role in the life insurance sector, as they are responsible for evaluating the risk associated with a portfolio of life insurance policies. If an insurance company has too many life insurance policies that become payable in a short period of time, it can cause financial ruin and insolvency. It is because of this inherent risk that investment actuaries analyze the policies that have been underwritten by an insurance company and determine a course of action to minimize the risk associated with them.

Risk associated with retirement benefits can also cause financial strain to a company over the long term. In order to minimize these risks, an investment actuary will evaluate the financial feasibility of the company maintaining a pension benefit plan and create strategies that will assist the company in ensuring that it is able to continue payments to its beneficiaries. These strategies could include making changes to the asset allocations of the pension plan or eliminating the plan altogether.

The services of an investment actuary are also used by government agencies on occasion. Generally, an investment actuary will analyze the financial risk associated with government bonds being issued by a local government or municipality. In this role, the investment actuary would analyze risk and make recommendations regarding the type of bonds that should be offered as well as the amount that should be issued.

An investment actuary combines mathematical analysis and statistics to determine the risks of particular insurance products.
An investment actuary combines mathematical analysis and statistics to determine the risks of particular insurance products.

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