Free CAS Exam 5 (Basic Ratemaking and Reserving) Lessons

All 38 CAS Exam 5 (Basic Ratemaking and Reserving) lessons are free to read, each with worked examples. Just a free account, no card.

Ratemaking

• Explain what an exposure base is and the role it plays when rates are developed. (13 min)
• Keep distorting events (large losses, catastrophes, pandemic effects) from skewing the data a rate indication relies on. (20 min)
• Produce an indicated overall rate change two ways, once with the pure premium approach and once with the loss ratio approach. (12 min)
• Weight an indication for credibility and defend both the method chosen and the complement of credibility it leans on. (23 min)
• Recommend a final rate change that weighs the indication against operational, marketing, and regulatory constraints and customer lifetime value. (27 min)
• Rate risks under alternative procedures: class plans, territories, deductibles, increased limits, coinsurance, and commercial lines mechanisms. (34 min)
• Interpret what a fitted predictive model, such as a GLM, says about the risks being priced. (21 min)
• Test a pricing situation against the four principles in the CAS Statement of Principles Regarding Property and Casualty Insurance Ratemaking. (19 min)
• Explain how an organization puts new rates into practice, from rating algorithms and minimum premiums to non-pricing alternatives, in service of its goals. (24 min)
• Discuss the qualitative and regulatory factors that shape how a rate proposal is built and filed. (22 min)
• Choose an exposure base for a given line of business or use case and defend the choice against the criteria that make an exposure base good. (15 min)
• Organize premium, loss, and exposure data on a calendar year, accident year, policy year, report year, or in-force basis, and move between these views. (19 min)
• Vet the data behind a pricing analysis, spotting errors, gaps, and results that fail a reasonableness check. (22 min)
• Decide how to partition data so each group stays homogeneous without sacrificing credibility, and explain the trade-offs behind the partition. (21 min)
• Prepare the loss and LAE inputs to a rate indication, applying standard ratios and loss adjustments and distinguishing claims-made from occurrence coverage. (24 min)
• Restate historical premium for ratemaking, bringing it on-level for past rate changes and reflecting premium audits. (23 min)
• Fit exponential or linear trends to exposures, premiums, and losses, and apply them over the correct trend periods. (25 min)
• Quantify the underwriting loads in a rate indication: fixed versus variable expenses, the profit and contingency provision, and reinsurance costs. (20 min)

Estimating Claim Liabilities

• Arrange claim data for a reserve study on calendar, accident, policy, underwriting, and report year bases. (17 min)
• Trace how changes in claims operations, underwriting, policy provisions, marketing, reinsurance, and recovery handling flow through to unpaid loss estimates. (15 min)
• Modify a reserve analysis when the environment moves under it: case reserve adequacy shifts, settlement rate changes, business mix or rate level changes, and inflation or legal developments. (21 min)
• Handle large losses in a reserve study so a few big claims do not distort the estimate. (16 min)
• Estimate what will come back through salvage, subrogation, and reinsurance recoveries in an unpaid claim analysis. (18 min)
• Project unpaid allocated loss adjustment expenses, including ratio-to-loss development approaches. (18 min)
• Project unpaid unallocated loss adjustment expenses using classical paid-to-paid and refined techniques. (24 min)
• Judge whether an unpaid claim estimate is adequate and reasonable by examining the loss ratios, severities, frequencies, and pure premiums it implies. (16 min)
• Track how reserves perform between full studies, comparing actual emergence to expected and rolling estimates forward at interim valuations. (20 min)
• Present a reserve analysis to management, investors, or regulators, explaining what changed since the last estimate and why. (12 min)
• Work with reinsurance structures to split losses into gross, ceded, and net amounts. (19 min)
• Vet reserving data and analyses, catching errors and results that fail a reasonableness check. (16 min)
• Bring outside information (inflation indices, tort reform, attorney involvement) into a reserve analysis when internal history alone is not enough. (18 min)
• Explain why grouping claims into homogeneous, credible segments matters when unpaid claims are estimated. (13 min)
• Distinguish the line characteristics that drive reserving behavior: long versus short tail, low versus high frequency, and occurrence versus claims-made coverage. (12 min)
• Explain what is at stake, for insurers and the entities that rely on them, when unpaid claim estimates are wrong. (15 min)
• Assemble run-off triangles for losses, claim counts, and ALAE, and read the development patterns they show. (19 min)
• Select and apply a tail factor to carry development beyond the edge of the observed triangle. (12 min)
• Read development triangles as diagnostics, spotting shifts in severity, frequency, and loss-to-premium relationships that signal operational change. (20 min)
• Estimate unpaid losses with the development (chain ladder), case outstanding development, expected claims, Bornhuetter-Ferguson, Cape Cod, frequency-severity, Berquist-Sherman, and Benktander techniques, and judge when each fits. (29 min)