Trends in the Actuarial Employment Market

A Great Career Choice

The actuarial career is regularly rated by business publications, such as Forbes, as one of the best careers in the U.S. Why? The short answer is favorable supply and demand characteristics. Actuaries are in short supply relative to the demand by employers. This leads to a high level of employment security and relatively high compensation levels. In today’s employment market it is hard to ask for much more than that.

The most recent economic downturn spared very few industries and companies. We all read the headlines about blue chip companies such as Bank of America, General Motors, Nokia, and H-P announcing layoffs of thousands of employees. Insurance companies, particularly life insurance companies, struggled mightily as well. The widespread and steep drop in nearly all asset classes during the “great recession” led to portfolio losses at these and other insurance companies. The most extreme example, of course, was AIG and the historic government bailout needed to cover enormous losses incurred by the firm’s financial products unit. AIG and dire headlines aside, actuaries were mostly spared. Actuarial layoffs were higher than in years past, but overall, most actuaries continue to be secure in their positions despite continued economic struggles. The reason, mentioned previously, is supply and demand. The need for actuaries within these companies is still significant and it is simply too difficult to hire enough qualified actuaries for most companies to lay off actuarial staff.

I think of actuaries as the “hub” in the “hub and spoke” organizational structure of an insurance company. Actuaries are central to the success of any insurance company. They develop/revise the products and establish/account for the reserves. Nothing is more central to an insurance company. All other areas of the insurance company from sales, underwriting, marketing, compliance, finance, and administration are the “spokes” that take (and give) direction from the work of actuaries. Of course, each of those non-actuarial functions is critical to the successful operation of any insurance company, but it all starts with the product. And the product, a financial liability or obligation to pay if a particular event happens, is created by the actuarial staff. As a result, compensation for actuarial professionals is quite attractive. Entry-level salaries begin at approximately $45,000 and six-figure compensation is expected for most actuaries who have achieved Fellowship.

Unfortunately, as most of you already know, the difficulty of the exam process makes becoming an actuary very challenging. This is something that Forbes magazine fails to mention! For those outside of the profession, I compare the actuarial exam process to law school graduates sitting for the bar exam every six months for 5 to 10 years. It requires an enormous amount of time and energy with no guarantee of success. It bears mentioning that it takes the typical actuarial student 5-10 years to achieve Fellowship. Of course, many do not achieve Fellowship. Many actuarial students stop at the Associate-level and others have successful careers with little or no exam progress.

Favorable Supply vs. Demand Characteristics

Despite continued weakness in the U.S. economy, the prospects for continued long-term strength in the actuarial employment market remain solid. As mentioned earlier, there are not enough college or graduate students pursuing careers in actuarial science after graduation to meet insurance industry

demand. Students with strong mathematical skills are highly sought after by a diverse range of industries. This competition for talent has led to fewer students making the decision to undergo the years of studying required to gain professional accreditation as an Associate or Fellow. Even in today’s

soft job market, the demand for talented actuarial students is greater than the supply. The shortage improves job stability for the profession as a whole. For this reason, even if you read headlines about “layoffs at ABC insurance company”, you should recognize that despite the layoffs to other personnel,

the company is likely hiring for actuaries or actuarial students. These favorable supply and demand characteristics are expected to remain in place for many years (if not decades). Moreover, the U.S.’s current immigration policy severely limits the pool of immigrants available to enter the actuarial

profession. Due to the added cost and legal paperwork, most employers either refuse entirely or rarely “sponsor” foreign actuaries for employment in this country.

Potential Off Shoring

Certain factors make “offshoring” the actuarial profession more difficult than other occupations, such as computer programming. For example, the SOA and CAS credentialing processes limit the supply of qualified actuaries in the U.S. The exams administered by these two industry associations are designed to meet the needs of the North American market.

U.S. employers therefore require SOA and CAS exams and designations for their employees. Mutual recognition rules between US and the UK, for example, do exist however UK actuaries are not easily placed into the U.S. market as their education and training is fairly different than their American

counterparts. This is primarily due to the differences in the insurance markets and regulation in both countries. Nonetheless, some off-shoring is inevitable as globalization continues its unending march.

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