[[Actuarial Notes Wiki|Wiki]] / **Exam 5 (CAS)** ## Exam 5 (CAS) The **Basic Techniques for Ratemaking and Estimating Claim Liabilities** is a 4-hour computer-based exam (4.5-hour Pearson VUE appointment) covering [[Ratemaking]] and [[Loss Reserving]] as part of the ACAS credentialing pathway. <div class="callout-cols-2"> > [!answer]- 📅 Exam Schedule 2026 > > <div class="highlight-upcoming" data-date-col="0"></div> > > |Dates|Exam| > |---|---| > |Apr 14 - Apr 21|Exam 5| > |Oct 19 - Oct 27|Exam 5| > > - [Register](https://www.casact.org/exams-admissions/exam-registration) ($850 registration fee) > [!answer]- 📄 Download Resources 2 PDFs > > - [Content Outline (Spring 2026)](https://www.casact.org/sites/default/files/2026-01/Exam_5_Content_Outline__Spring_2026_.pdf) > - [CAS Exam 5 Page](https://www.casact.org/exam/exam-5-basic-ratemaking-and-est-claim-liabilities) </div> > [!answer]- 📕 Source Material 6 Sources > > |Source|Domains / Tasks| > |---|---| > |[[Basic Ratemaking (Werner - 2016)]]|A1–A15, A17| > |[[Estimating Unpaid Claims Using Basic Techniques (Friedland - 2010)]]|B1–B42| > |[[ASOP 12 - Risk Classification (ASB - 2005)]]|A4–A5| > |[[ASOP 13 - Trending Procedures in Property Casualty Insurance (ASB - 2009)]]|A4, A8| > |[[ASOP 43 - Property Casualty Unpaid Claim Estimates (ASB - 2007)]]|A4, B2| > |[[Statement of Principles Regarding Property and Casualty Insurance Ratemaking (CAS - 1988)]]|A4, A16| ### Learning Objectives > [!example]- A. Ratemaking {45–55%} > > ### A. Ratemaking > > Candidates should have a thorough understanding of basic [[Ratemaking]] so that they can analyze data, select appropriate techniques, and develop solutions to problems. > > 1. Define and describe [[Exposure Base]]s as used in the ratemaking process > 2. Evaluate and select an exposure base in a given scenario (e.g., line of business, use cases) > 3. Aggregate and/or organize ratemaking data by: [[Calendar Year]], [[Policy Year]], [[Accident Year]], [[Report Year]], close year, in-force, net of reinsurance > 4. Evaluate ratemaking data and analyses for errors and reasonableness > 5. Separate data into groups that balance [[Homogeneity]] and [[Credibility]] and summarize the considerations for determining such groups > 6. Calculate [[Loss and Loss Adjustment Expense]]s for ratemaking (e.g., common ratios, adjustments to losses, claims-made vs occurrence coverage) > 7. Calculate various adjustments to the premium used for ratemaking (e.g., [[On-Leveling]], premium audit) > 8. Calculate and apply trends (e.g., [[Exposure Trend|Exposure]], [[Premium Trend|Premium]], [[Loss Trend|Loss]]) using different approaches (e.g., exponential and linear analyses) > 9. Calculate the underwriting provisions underlying the overall [[Rate Level Indication]] (e.g., fixed and variable expenses, profit and contingency, reinsurance costs) > 10. Demonstrate proper handling of extraordinary losses for ratemaking purposes (e.g., [[Large Loss]]es, [[Catastrophe]]s) > 11. Construct an overall rate level indication using the [[Pure Premium Method]] and [[Loss Ratio Method]] > 12. Apply [[Credibility]] to ratemaking analyses using different methods and justify choice of complement > 13. Select and justify a final rate change beyond the calculated overall rate level indication (e.g., operational, marketing, regulatory [[Ratemaking Constraints|Constraints]], [[Lifetime Value]]) > 14. Perform calculations related to alternative ratemaking procedures (e.g., classification, territory, [[Deductible]]s, [[Increased Limits]], [[Coinsurance]], [[Commercial Lines Rating]] mechanisms) > 15. Analyze results of predictive models (e.g., [[Generalized Linear Model]]) > 16. Apply the four principles of ratemaking to a scenario > 17. Understand the [[Considerations for Implementing Rates]] to achieve an organization's goals (e.g., non-pricing solutions, minimum premium, rating algorithms) > > **Readings:** Werner & Modlin · CAS Ratemaking Principles · ASOP 12 · ASOP 13 · ASOP 43 > [!example]- B. Estimating Claim Liabilities (Reserving) {45–55%} > > ### B. Estimating Claim Liabilities (Reserving) > > Candidates should understand how to estimate [[Unpaid Claims]] for both insurance entities and non-insurance entities that retain risk. > > 18. Organize reserving data by: [[Calendar Year]], [[Accident Year]], [[Policy Year]], [[Underwriting Year]], [[Report Year]] > 19. Evaluate reserving data and analyses for errors and reasonableness > 20. Describe the role of [[Homogeneity]] and [[Credibility]] of data in estimating unpaid claims > 21. Describe the fundamentals of different [[Types of Insurance]] (e.g., long tail vs. short tail lines, low frequency vs. high frequency lines, occurrence vs. claims made) > 22. Articulate the importance of accurate estimates of unpaid claims > 23. Build and analyze [[Development Triangle]]s (e.g., loss, count, [[Allocated Loss Adjustment Expense]] (ALAE)) > 24. Apply a [[Tail Factor]] > 25. Use development triangles as diagnostic tools to identify changes and trends (e.g., loss and claim count, ratio of losses to premium, severity, ratios of loss and claim counts) > 26. Calculate and evaluate unpaid loss estimation techniques (i.e., [[Chain Ladder Method]], case outstanding development, [[Expected Loss Method]], [[Bornhuetter-Ferguson Method]], [[Cape Cod Method]], frequency-severity, [[Berquist-Sherman]], [[Benktander Method]]) > 27. Assess the influence of operating changes on the estimation of unpaid losses (e.g., claims coding, claims processing, underwriting and policy provisions, marketing, reinsurance, treatment of recoveries such as deductibles, salvage and subrogation) > 28. Adjust data and/or estimation techniques for changes in the internal and external environment (e.g., shift in adequacy of case outstanding or settlement rates, change in mix of business, change in rate level, inflationary or legal environment) > 29. Consider the impact of and adjust for the presence of large losses in a reserving analysis > 30. Calculate and evaluate estimation techniques for recoveries (e.g., [[Salvage and Subrogation]], reinsurance) > 31. Calculate and evaluate estimation techniques for [[Allocated Loss Adjustment Expense]]s > 32. Calculate and evaluate estimation techniques for [[Unallocated Loss Adjustment Expense]]s > 33. Evaluate the results of a reserve analysis for adequacy and reasonableness using loss ratios, severities, pure premiums, frequencies, indicated unpaid losses, etc. > 34. Monitor results for adequacy and reasonableness including interim valuations (e.g., actual versus expected, roll forward analysis) > 35. Communicate results and drivers of change to various stakeholders (internal management, investors, regulators) > 36. Define and apply [[Reinsurance]] concepts to calculate net, ceded, and gross losses > 37. Utilize external information in a reserve analysis > > **Readings:** Friedland · ASOP 43