Exam 5 Fall 2020 Discussion Thread

Just starting a thread. Anyone else taking this exam? Where’s everyone out. Did my first full practice exam (Fall 2019) and while not in passing shape I think I did well for a first attempt particularly at an exam that appeared to have a lower pass rate. Planning to do 2 practice exams a week if I can and review examiner’s notes/solutions/other notes in between.

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I’m not taking the exam, I’m an FCAS. But I figured I would say “hi”, since this a a new community. I’m also really curious how the computer-based tests end up going. So I may be watching these threads.


I’ve gone through the materials once. Going over some ratemaking topics and then I plan to start on practice exams. I’m having a hard time with chapter 14 on Werner Modlin

What are you struggling with in that chapter? I may or mayn’t be able to help, but I’m guessing someone here could help you out.

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I have trouble figuring out which method to use to derive a new base rate. I’ve been working on old exam problems but can’t seem to get them right even when the question specifies which method I should be using. For example, F2015, Q11 - I figured out which territory to cap but then can’t seem to get my head around how to calculate the new base rate

I haven’t looked at that particular question yet but assuming no capping. You take the weighted average of the proposed territorial factors as you off-balance.

So if your base rate is B, you want a C% Change, and the weighted average proposed rating factor is X.
Then your new base rate would be B*(1 + C)/(X).

For a problem with capping, this gets a bit more complicated, but it amounts to determining what you premium shortfall is and then adjusting the base rates to compensate (and then readjusting the territorial rating factor after the baserate offset is considered to keep it at CAP).

Things get slightly more complicated if there is an additive fee involved as well but the idea is always the same. Want target change of “C”, propose new rating factors, then adjust the base rates to keep factor how much change you are getting from those rating factors.

I think i may have over-simplified it a bit, but after you do a few problems it’ll get easier to know what you need to do.

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About a month out for me now. Starting to do past CAS exams. Definitely enjoy doing these problems in Excel.

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If there’s a B-S problem with increased settlement speeds and strengthened case reserves and we have to select our own severity trend should we select it using Adjusted paid claim / adjusted closed claim count triangle or use the original unadjusted paid claim / unadjusted closed claim count triangle ?

I’m too far from the syllabus to know if there’s a preferred method. But if options are discussed, write a sentence saying which one you are picking and why. Even if you don’t get full credit (because there was some reason your were supposed to use a different trend) you will get most of the credit, because the grader will understand what you did and that it was basically what you were supposed to be doing.

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Friedland used unadjusted avg paid data to determine the severity trend. I would use this method in the exam. But like Lucy mentioned, state your assumptions if you use adjusted paid data

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same here, I also have difficulties understanding the implementation chapter, anyone can understands these 3 questions below?

  • Spring 2015 Q10 (how is the objective of PLR = 65% translated into the overall rate level change objective?)

  • Fall 2015 Q9

  • Fall 2015 Q11

For Spring 15, They want you to figure out the rate indication first and choose rates that match the indication.

So basically you want to achieve a 65% loss ratio in each territory. So for Territory B that would mean a rate decrease, and territory A that would be an increase. However you have to Cap A at 20% (the change needed would be higher, so youd need to make up the shortfall with a slightly higher change for B.


I’m puzzled at the 65% lr in each territroy, why should this be the case? the overall weighted lr is 69% so if we bring the total down to 65%, it does not necessarily mean the by territory lr also has to be 65% right? I couldn’t find the link between by terr and the overall target…


Don’t know the problem, but as an ex-pricing actuary, what are your objectives?
If overall indication is down, then you apply that same factor to each category so the territorial relativities remain the same. If capping is involved for a specific territory, you need to find out where to dump the excess rate, usually spread across the rest of the territories.

The idea here is that Terr A has an 80% ult loss ratio
and Terr B is a 60% and you are targeting a 65% Variable PLR.

So you have to do the math Terr A needs an 80%/65%-1 = 23.07% change and similarly terr B needs a 60%/65%-1 = -.0769% change.

There’s a wrinkle though in that you have to cap individual territores to a 20% change, so you have to go back and allocate the premium lose to Territory B, and then calculate the final change to that Territory so that youll still end up hitting rate adequacy (assuming the targeted 65% variable PLR).

After you adjust for this, the overall would be a 65% but Territory A would be higher than that and territory B would be lower than that (because of the territorial rate capping).

Just finished the Fall 2019 Exam. It’s a very different exam than prior ones. Makes sense why pass rate was so low.

From Fall 2019 # 24

Why were we supposed to use BF method (as per Examiner report) to estimate total IBNR? The question doesnt say use BF technique

Yes I’m taking on 12.7.2020. This is my 7th attempt at this exam. I’ve been through material and working on problems from each chapter like a few. Then I’ll take some practice exams. Not sure what to expect on this exam. I need to look at sample problems CAS provides for Pearson interface so I’m comfortable taking when big day comes. Maybe this time I’ll pass this exam.

Hi Melissa,
sorry to hear that you have to retake the exam several times, it also makes me anxious…what are the reasons you think contributed to retaking this exam, is the exam too difficult or you believe you didn’t put in enough study hours? my exam is in 2 weeks, I really feel unsure about the exam right now, this is my second attempt, and switching from paper to CBT is a whole new learning process for me.best of luck!

I struggled with the kinds of questions they were giving on exam not the material. Most of the time I get pissed off about the types of questions since some were insane. Last sitting I hated doing one involving trying to guess an non-uniform earning pattern just to aggregate exposures. Typically these problems shouldn’t be complicated so didn’t appreciate CAS putting on exam just to make me waste time on it. I got partial credit but point it it wasn’t a fair problem to give. I have gotten 5 then 4 then 5 again on last 3 attempts so you can see my frustration with CAS.