Actuaries: jargon-buster

What is an actuary?
Actuaries are mathematicians who are able to calculate the probability of certain events and their likely financial impact.

For this reason, actuaries are often employed by insurance, pension, mortgage and investment companies such as banks and building societies.

Actuaries A-Z

Actuarial report
Also known as a valuation report, this is the written report of an actuarial valuation. It's also the term used when actuaries suggest how changes to an investment scheme might affect it.

Actuarial valuation
An assessment carried out by actuaries on a specific investment scheme (such as a company pension) to decide whether the fund will have enough money to repay its investors at the end of an agreed period.

Actuarial value
This is the value that actuaries put on something based on their assessment.

Annuity
This is a fixed amount of money paid each year until a particular event (such as death in the case of life insurance, or retirement for a pension) at which time the company that has received the annuity will make a payout. The annuity may be divided into more than one payment (such as monthly instalments).

Asset management
An asset is a specific fund's investments. Actuaries will recommend certain programmes of investment that they feel will offer a "safer" return to aid in asset management.

Casualty actuaries
Sometimes referred to as non-life or general insurance actuaries, casualty actuaries specialise in analysing catastrophic or unnatural risks to people or property. These actuaries would assist in liabilities insurance covering products such as car, homeowners, workers' compensation, malpractice and even terrorism insurance.

Liability management
Liability is the total expected value of a future return on an investment from the fund to its investors. Actuaries can predict this amount and highlight any potential risks.

Risk assessment
Actuaries use a combination of mathematics, business acumen, analysis, political knowledge and an understanding of human behaviour to try to predict what may go wrong in any given investment. Every investment has an element of risk and actuaries attempt to assess to what extent that risk may endanger its returns.

Valuation basis
This is how actuaries value a scheme's assets and liabilities on which they base the estimates in an actuarial report.

Valuation method
There are several ways in which an actuary can value a fund's assets and liabilities. A valuation report must state which method was used.