Actuaries: An Overview

Jonathan Adams

February 3rd, 2016

What Do Actuaries Do?

  • Combine economics, finance, and statistics (to name a few)
    • Ratemaking
    • Investing
    • Loss Reserving
    • Catastrophe Modeling
  • Need to be a "jack-of-all-trades."

Ratemaking

  • Estimate future losses
    • Explore large datasets
    • Apply personal knowledge
    • Fit models
      • Regression
      • Statistical distribution
      • Time series
  • Prevent insolvency
  • Provide a profit
  • Do not overcharge
    • Similar to "do no harm"

Investing & Loss Reserving

  • Collect premiums at beginning of "year"
  • Money should be invested
    • Time value of money
    • Rates of return
    • Financial products
  • Need to estimate losses
    • Loss reserving
    • IBNR
    • Chain Ladder
    • Can span several years

Catastrophe (CAT) Modeling

  • What could happen?
    • What is probability of it happening?
  • Account for existing correlations and simulate 10,000 years of data
  • Copulas are powerful tool
    • Simultaneously account for marginal distributions and correlation structure
  • http://freakonometrics.hypotheses.org/17113
Sample Copulas
Example Marginals
Clayton Copula Sample
Sample Loss Curves

How to Prepare

  • Learn to program
    • R
    • Python
    • SQL
    • Javascript
    • Cloud Computing (AWS/Azure)

Questions?