An actuary is an employee of the insurance company. This person analyzes the financial consequences of risk. To do this analysis an actuary uses mathematical models to predict the financial outcomes of uncertain future events. An example would be using mathematical business models to predict the cost of future natural disasters to ensure that the insurance company has enough money set aside (in “reserves”) to pay the claims that would result.

The effect of a catastrophe such as Hurricane Katrina or the Quebec Ice Storms will cause a rise in rates. The reinsurance companies will raise their rates. These rates will affect the premiums charged by the insurance companies that provide you with your home, automobile or business insurance. The actuary is the person working on determining just what these rates should be.