Editing Actuary (section)

==History==
{{see also|Actuarial science#History}}

[[File:Nathaniel Bowditch (1773-1838), American mathematician and actuary.jpeg|thumb|right|alt=A black and white picture of Nathaniel Bowditch, an eighteenth century American actuary|Mathematician [[Nathaniel Bowditch]] was one of America's first insurance actuaries.]]

===Need for insurance===
The basic requirements of communal interests gave rise to risk sharing since the dawn of civilization.{{sfn|Loan|1992}} <!-- From here to end supported by Lewin -->For example, people who lived their entire lives in a camp had the risk of fire, which would leave their band or family without shelter. After [[barter (economics)|barter]] came into existence, more complex risks emerged and new forms of risk manifested. Merchants embarking on trade journeys bore the risk of losing goods entrusted to them, their own possessions, or even their lives.  Intermediaries developed to warehouse and trade goods, which exposed them to [[financial risk]]. The primary providers in extended families or households ran the risk of premature death, disability or infirmity, which could leave their dependents to starve. [[Credit (finance)|Credit]] procurement was difficult if the creditor worried about repayment in the event of the borrower's death or infirmity. Alternatively, people sometimes lived too long from a financial perspective, exhausting their savings, if any, or becoming a burden on others in the extended family or society.{{sfn|Lewin|2007|pp=3–4}}

===Early attempts===
In the ancient world there was not always room for the sick, suffering, disabled, aged, or the poor—these were often not part of the [[Collective consciousness|cultural consciousness]] of societies.{{sfn|Perkins|1995}} Early methods of protection, aside from the normal support of the extended family, involved charity; religious organizations or neighbors would collect for the destitute and needy. By the middle of the 3rd century, charitable operations in [[Ancient Rome|Rome]] supported 1,500 suffering people.{{sfn|Perkins|1995}} Charitable protection remains an active form of support in the modern era,{{sfn|GivingUSA|2009}} but receiving charity is uncertain and often accompanied by [[social stigma]].{{sfn|Lewin|2007|pp=3–4}}

Elementary [[mutual aid (organization)|mutual aid]] agreements and pensions did arise in antiquity.{{sfn|Thucydides}} Early in the [[Roman Empire|Roman empire]], associations were formed to meet the expenses of burial, cremation, and monuments—precursors to [[Burial society|burial insurance]] and [[Friendly society|friendly societies]]. A small sum was paid into a communal fund on a weekly basis, and upon the death of a member, the fund would cover the expenses of rites and burial. These societies sometimes sold shares in the building of [[Columbarium|columbāria]], or burial vaults, owned by the fund.{{sfn|Johnston|1903|loc=§475–§476}} Other early examples of mutual [[surety]] and [[Life insurance|assurance]] pacts can be traced back to various forms of fellowship within the Saxon clans of England and their Germanic forebears, and to Celtic society.{{sfn|Loan|1992}}

Non-life insurance started as a hedge against loss of cargo during sea travel. Anecdotal reports of such guarantees occur in the writings of [[Demosthenes]], who lived in the 4th century BCE.{{sfn|Lewin|2007|pp=3–4}} The earliest records of an official non-life insurance policy come from [[Sicily]], where there is record of a 14th-century contract to insure a shipment of wheat.{{sfn|Sweeting|2011|p=14}} In 1350, Lenardo Cattaneo assumed "all risks from act of God, or of man, and from perils of the sea" that may occur to a shipment of wheat from Sicily to Tunis up to a maximum of 300 [[Florin (Italian coin)|florin]]s. For this he was paid a premium of 18%.{{sfn|Lewin|2007|pp=3–4}}

===Development of theory===
[[File:Excerpt from CDC 2003 Table 1.pdf|thumb|right|alt=A table of numbers; the first page of the U.S. 2003 mortality table.|2003 U.S. mortality ([[life table|life]]) table, Table 1, Page 1]]
<!-- Sourced to Heywood: start -->During the 17th century, a more scientific basis for [[risk management]] was being developed. In 1662, a London [[draper]] named [[John Graunt]] showed that there were predictable patterns of longevity and death in a defined group, or [[Cohort (statistics)|cohort]], of people, despite the uncertainty about the future longevity or mortality of any one individual. This study became the basis for the original [[life table]]. Combining this idea with that of [[compound interest]] and [[annuity]] valuation, it became possible to set up an insurance scheme to provide life insurance or pensions for a group of people, and to calculate with some degree of accuracy each member's necessary contributions to a common fund, assuming a fixed rate of interest. The first person to correctly calculate these values was [[Edmond Halley]].{{sfn|Heywood|1985}}<!-- Sourced to Heywood: end --> In his work, Halley demonstrated a method of using his life table to calculate the premium someone of a given age should pay to purchase a life-annuity.{{sfn|Halley|1693}}

===Early actuaries===
<!-- Ogborn 1956 p. 235: start -->[[James Dodson (mathematician)|James Dodson]]'s pioneering work on the [[Whole life insurance#Level premium system|level premium system]] led to the formation of the Society for Equitable Assurances on Lives and Survivorship (now commonly known as [[The Equitable Life Assurance Society|Equitable Life]]) in London in 1762. This was the first life insurance company to use premium rates that were calculated scientifically for long-term life policies, using Dodson's work. After Dodson's death in 1757, [[Edward Rowe Mores]] took over the leadership of the group that eventually became the Society for Equitable Assurances. It was he who specified that the chief official should be called an ''actuary''.{{sfn|Ogborn|1956|p=235}}<!-- Ogborn 1956 p. 235: end --> Previously, the use of the term had been restricted to an official who recorded the decisions, or ''acts'', of [[ecclesiastical court]]s, in ancient times originally the secretary of the [[Roman senate]], responsible for compiling the ''[[Acta Senatus]]''.{{sfn|Ogborn|1956|p=233}} Other companies that did not originally use such mathematical and scientific methods most often failed or were forced to adopt the methods pioneered by Equitable.{{sfn|Bühlmann|1997|p=166}}

===Development of the modern profession===
{{main|Actuarial science}}

In the 18th and 19th centuries, computational complexity was limited to manual calculations. The calculations required to compute fair insurance premiums can be burdensome. The actuaries of that time developed methods to construct easily used tables, using arithmetical short-cuts called [[Actuarial science#Technological advances|commutation function]]s, to facilitate timely, accurate, manual calculations of premiums.{{sfn|Slud|2006}} In the mid-19th century, professional bodies were founded to support and further both actuaries and actuarial science, and to protect the public interest by ensuring competency and ethical standards.{{sfn|Hickman|2004|p=4}} Since calculations were cumbersome, actuarial shortcuts were commonplace.

Non-life actuaries followed in the footsteps of their life compatriots in the early 20th century. In the United States, the 1920 revision to workers' compensation rates took over two months of around-the-clock work by day and night teams of actuaries.{{sfn|Michelbacher|1920|pp=224, 230}} In the 1930s and 1940s, rigorous mathematical foundations for [[stochastic process]]es were developed.{{sfn|Bühlmann|1997|p=168}} Actuaries began to forecast losses using models of random events instead of [[Deterministic system|deterministic methods]]. Computers further revolutionized the actuarial profession. From pencil-and-paper to punchcards to microcomputers, the modeling and forecasting ability of the actuary has grown vastly.{{sfn|MacGinnitie|1980|pp=50–51}}

Another modern development is the convergence of modern [[finance theory]] with actuarial science.{{sfn|Bühlmann|1997|pp=169–171}} In the early 20th century, some economists and actuaries were developing techniques that can be found in modern financial theory, but for various historical reasons, these developments did not achieve much recognition.{{sfn|Whelan|2002}}<ref>They were relevant to, and achieved recognition from, short-term derivatives traders and the like, but most actuaries ignored them because they were unsuitable for long-term actuarial calculations; they relied heavily on parameter values that were derived from obsolete economic history and were extremely uncertain – in effect, arbitrary – in the context of predicting the longer-term future.</ref> In the late 1980s and early 1990s, there was a distinct effort for actuaries to combine financial theory and stochastic methods into their established models.{{sfn|D'Arcy|1989}} In the 21st century, the profession, both in practice and in the educational syllabi of many actuarial organizations, combines tables, loss models, stochastic methods, and financial theory,{{sfn|Feldblum|2001|pp=8–9}} but is still not completely aligned with modern [[financial economics]].{{sfn|Bader|Gold|2003}}