Errata
April 30th, 2012
Sample Exam Q30 answer: This should be 77.5
Errata
April 29th, 2012
Note that these will be posted to my errata spreadsheet after 5/6
Sample Exam:
-Q32: please change the ratio of reserves to premium from 0.7 to 0.75
CULP:
-2005 Q38b solution: change to “the target loss is a real concern in the shortfall risk as opposed to an arbitrary level in VaR”
STULZ:
-manual pg2: delete “systematic, or”
Sample Exam Q20
April 26th, 2012
I am getting a number of emails about this one.
Q. Why did I SUBTRACT twice the covariance instead of add?
A. I was using the Butsic methodology where we need to multiply the covariance by -1 if the items are from opposite sides of the balance sheet (I was making the assumption that this adjustment has not been made).
Since this was a Goldfarb question, I don’t think that it is perfectly acceptable to assume that the numbers provided to you in the question already account for the fact that the items are on opposite sides of the balance sheet… therefore you should still get full credit if you added instead of subtracted.
Misc
April 11th, 2012
The “new/updated lessons” section of the website currently mentions that the notecards are new. There were NO changes to the content of the notecards. Instead, we created a single PDF file that contained all of the cards.
FYI I will be overseas between 4/21 and 5/5. I will take my laptop with me, but there will be periods when I will be traveling and will have no internet access. My email response time during this period may be longer than usual.
Additional Questions/ Feldblum IRR Initial Reserves
April 4th, 2012
2 things:
-I have posted a second set of sample questions to the website (in the “Additional Material” section of the Study Manual). A practice exam should follow in 1-2 weeks
-I am receiving several emails about the initial reserves in the Feldblum IRR methodology…the confusion seems to be whether the reserves should be set to the loss reserves or UEPR or some combination of the two. If the question does not state or imply a particular assumption, you have complete freedom (and should receive full credit either way).
My preference is to assume that the initial reserves are equal to the loss reserves ONLY (ie assume that the insurer knows about the expected losses at time 0). The advantage of this assumption is that you can reflect the premium deficiency when it applies (Exam 6)
More comments on the move to a 4hr exam
March 24th, 2012
More comments on my earlier post…
The CAS mentioned that the 2012 Exam 9 had been completed before the time limit was increased to 4hrs (so it was written with the intention of being a 3hr exam). That being said, “The Executive Council’s decision to increase the test time was made specifically to allow candidates more time to complete THIS exam”.
With all the “controversy” going on now (extremely low pass rates, SOA possibly offering general insurance exams, etc), it is possible that the CAS management is trying to improve the process for students (we’ve seen some improvements already…. eg releasing qualifying candidates exam responses, offering exams 5 & 6 twice a year). MAYBE, one additional improvement is to address the fact that a lot of these exams really do not provide enough time (in my opinion, these exams with tight time constraints don’t really do a great job of identifying a MQC candidate… there are a lot of students who know the majority of the material, but just don’t get the time to demonstrate this in the exam).
My conclusion from all of this is that the exam should take the average candidate MORE than 3hrs (hence the increase to 4hrs), but most probably less than 4hrs (I don’t think the question writers would’ve put together a 4hr exam when the time limit was initially 3hrs). That being said, when preparing for the exam, it is best to be conservative, and assume that it will take the average person the entire 4hrs. So try to avoid writing too much/ get used to skipping questions that you can’t answer quickly/ use bullet points, etc.
Hopefully going forward, the exams will continue to be 4hrs. There is just too much material in this one for it to only be 3hrs.
May 2012 Exam 9 Time Increased to Four Hours
March 22nd, 2012
Good move, IMO
http://www.casact.org/members/index.cfm?fa=viewArticle&articleID=1890&CFID=41033777&CFTOKEN=23755306
Historical CAS Exams
March 11th, 2012
I have uploaded modified CAS exams where I combined the relevant questions from old exams 8 & 9.
The first page of each exam contains the modified time limit.
2008 Q14 (Robbin/ Feldblum IRR)
March 9th, 2012
I am getting a number of emails about this question. The main confusion seems to be about the initial surplus requirement. The question states that the surplus requirement is “1/4 the sum of the unearned premium reserves and loss reserves”.
So what are the reserves at time 0? In this particular case, I am assuming that the initial reserves consist of just the unearned premium reserves… the insurer does not know about the losses at time 0. Over time, the UEPR will reduce to 0 and the loss reserves will increase up to the expected losses of 690.
Note that I only treated the reserves this way to produce the same answer using both the Robbin and Feldblum IRR methodologies.
However, the standard assumption to use for the Feldblum IRR questions is that the insurer already knows about the entire loss amount at time 0, and can as a result, earn all of the premium instantly. As a result, at time 0, the insurer would have no UEPR, and loss reserves equal to the expected loss. I believe that this particular treatment would get full credit as well.