Free CAS Exam 5 (Basic Ratemaking and Reserving) Ratemaking Data & Exposures Practice Questions
Ratemaking data and exposures open the Ratemaking section of CAS Exam 5, which carries 45-55% of the exam (CAS). Questions test choosing and defending an exposure base, organizing premium, loss, and exposure data on calendar year, accident year, policy year, report year, and in-force bases, vetting pricing data for errors and unreasonable results, and partitioning data so each group stays homogeneous without losing credibility.
24 questions9 easy13 medium2 hard2026 syllabus
Sample Questions
Question 1
Easy
Which of the following best describes the role of an exposure base in the ratemaking process?
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Correct Answer: C
Solution
C is correct. An exposure base is the fundamental measure of the amount of risk an insurer assumes. In the rating algorithm, premium equals the rate (price per unit of exposure) multiplied by the number of exposure units. Because pure premium is defined as losses divided by exposures, the exposure base serves as the denominator that normalizes loss experience so rates can be developed on a per-unit basis.
Question 2
Medium
While vetting exposure data for a stable book of annual policies, a reviewer finds that reported earned exposures exceed written exposures in every year. What is the most appropriate first response?
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Correct Answer: A
Solution
A is correct. Earned exposures can never exceed written exposures over the life of a stable book, because exposure is earned only after it has first been written. Observing earned above written in every year fails a basic reasonableness check and points to a data problem such as double-counting, a units mismatch, or a mapping error. The correct action is to investigate and correct the data before relying on it.
Question 3
Hard
Three one-year policies are shown below. Premium is earned uniformly over each policy term. Compute the calendar year 2025 earned premium across all three policies.
| Policy | Effective date | Term | Annual premium | |---|---|---|---| | A | Jan 1, 2025 | 1 year | $1,200 | | B | Jul 1, 2025 | 1 year | $2,400 | | C | Oct 1, 2024 | 1 year | $1,800 |
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Correct Answer: C
Solution
C is correct. Earned premium in calendar year 2025 is the portion of each policy's term that falls within 2025, times its annual premium. Policy A runs entirely in 2025, earning all $1,200. Policy B (effective July 1, 2025) earns 6 of 12 months in 2025: 2,400×6/12=$1,200. Policy C (effective Oct 1, 2024, expiring Sep 30, 2025) earns 9 of 12 months in 2025: 1,800×9/12=$1,350. The total is 1,200+1,200+1,350=$3,750.
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