Free CAS Exam 5 (Basic Ratemaking and Reserving) Principles, Implementation & Regulation Practice Questions
Principles, implementation, and regulation close the Ratemaking section of CAS Exam 5 (45-55% of the exam, CAS). Questions test the four principles of the CAS Statement of Principles Regarding Property and Casualty Insurance Ratemaking, how new rates reach practice through rating algorithms, minimum premiums, and non-pricing alternatives, and the qualitative and regulatory factors that shape how a rate proposal is built and filed.
30 questions10 easy15 medium5 hard2026 syllabus
Sample Questions
Question 1
Easy
In a prior-approval regulatory jurisdiction, which statement best describes how the regulatory regime shapes the filing of a proposed rate change?
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Correct Answer: B
Solution
B is correct. Under a prior-approval regime the insurer must submit its rate filing and obtain the regulator's affirmative approval before the new rates may take effect. This front-loads the regulatory review into the filing process, so anticipated objections, supporting exhibits, and the size of the requested change all influence how the proposal is built and how long implementation may take.
Question 2
Medium
An actuary's analysis produces an indicated rate change of +19%, but management proposes filing +11%. Which of the following is a legitimate qualitative or regulatory factor that supports filing below the indication rather than a technical error that should be corrected inside the indication itself?
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Correct Answer: D
Solution
D is correct. Regulatory limits on the size of an annual rate change and concern about policyholder disruption are qualitative and regulatory considerations that legitimately lead an insurer to select and file a change below the actuarial indication, often phasing it in over time. The indication remains actuarially sound; the departure reflects filing judgment.
Question 3
Hard
A commercial policy has payroll of $250,000 rated per $100 of payroll at a base rate of $1.10 per unit. The algorithm applies an experience modification of 0.85 and a schedule-rating credit of 10% (multiplier 0.90), then adds a $100 expense constant. The minimum premium is $1,500. What premium is charged?
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Correct Answer: B
Solution
B is correct. Exposure units: 250,000/100=2,500. Base premium: 2,500×1.10=2,750. Apply the experience mod: 2,750×0.85=2,337.50. Apply the schedule credit: 2,337.50×0.90=2,103.75. Add the expense constant: 2,103.75+100=2,203.75. Since $2,203.75 exceeds the $1,500 minimum, the minimum does not bind and the charged premium is $2,203.75.
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