Skills and knowledge for working as an actuary in financial services: formula sheet

Key formulas

Stage 1 of the cycle

Specify the problem = understand the need + identify risks + set objectives and constraints

Includes the client, the product or scheme, the time horizon and who bears which risk.

Stage 2 of the cycle

Develop the solution = choose model + set assumptions + run and test + communicate results

Think about the model design, the data, the assumptions, sensitivity testing and the advice given.

Stage 3 of the cycle

Monitor experience = actual vs expected + analyse reasons + update assumptions and solution

This is an analysis of the difference between actual and expected results, and it feeds back to the start.

Wider context

Environment = economic + regulatory and legal + tax + competitive + professional

Mention it around all three stages, not as a separate fourth step.

Core principles of professional conduct

Integrity + Competence + Care + Objectivity + Confidentiality + Public interest

Use these as a checklist for any ethics question. Exact IAI wording may differ, so match the headings to the code you studied.

Conflict of interest response

Identify → Disclose → Manage or Avoid → Document

If a conflict cannot be managed fairly, the safe answer is to decline or withdraw.

Standards versus regulation

Regulation = legal force, set by law or regulator. Professional standards = set by the professional body, enforced by discipline.

Say which one applies and that you must comply with both.

Ethical decision steps

Facts → Principles → Options → Decision → Review

A simple framework that structures a written answer.

Quick revision

• The actuary applies financial and statistical skills to problems involving uncertain future events.
• The control cycle is a loop: specify the problem, develop a solution, monitor the results, then feed back.
• Monitoring results and learning from them is what makes the cycle continuous rather than one-off.
• Technical skills include modelling, statistics, data handling and financial theory.
• Technical skill alone is not enough; advice must be understood by the client to be useful.
• Communication means adapting language and detail to a non-actuarial audience.
• Business skills include commercial awareness, teamwork and understanding the client's objectives.
• Professionalism includes integrity, competence, confidentiality and putting the public interest ahead of your own.
• Actuaries must follow the professional standards and guidance set by their professional body.
• Regulation and the wider business environment shape what advice is allowed and what is practical.
• In case answers, link each point to the facts given instead of listing general statements.
• Always consider ethical and regulatory points when advice affects customers or members.

Common mistakes

• Giving one generic list of duties for every sector Fix: Tie every duty to the risk of the sector in the question. Life is long-term and uncertain in mortality and returns. General insurance is short-term and claim-driven.
• Saying actuaries only calculate premiums Fix: Add reserving, valuation, capital assessment, risk management, product design and advice to management and regulators.
• Treating the cycle as a one-way list that ends at monitoring. Fix: Always state that monitoring results feed back into the problem specification and the solution.
• Giving generic textbook points that ignore the scenario. Fix: Pick facts from the question, such as product type, customer group or regulator, and link each point to them.
• Listing skills with no link to the scenario. Fix: For every skill, write 'in this case it is used to...' with a specific task.
• Treating modelling and statistics as the same skill. Fix: Say modelling builds the structure of the process, while statistics estimates parameters and tests how reliable they are.
• Writing for a technical audience when the scenario names a non-technical one. Fix: Underline the audience in the question. Replace jargon with plain words and focus on meaning and action.
• Burying the conclusion at the end after long method descriptions. Fix: State the key result and recommendation first, then support it.
• Treating professional standards and regulation as the same thing. Fix: Remember who sets them and who enforces them. Law and regulators give legal penalties. The professional body gives disciplinary action.
• Saying a conflict of interest is always forbidden. Fix: Say it must be identified and managed. Decline only if it cannot be managed fairly.

Exam tips

• Always start your written answer by naming the sector and its main risk. It focuses the whole answer.
• Use the scenario facts in the question. Examiners reward application over lists.
• Include a line on professional duty or public interest. It is an easy mark many students skip.
• In multiple-choice questions, check whether an option describes a different profession or a different sector.
• Always apply the cycle to the scenario. Name the product, client or scheme in each stage.
• Use the three stage headings to organise your answer, and then add the environment point.
• Show the feedback loop explicitly, since many students miss it.
• For a monitoring question, say what you compare, why differences arise and what you change.