ACAS exams & assessments

Exam 5

Basic Ratemaking and Estimating Claim Liabilities

5 discussions

Study strategy

Exam 5: A constructed answer needs an audit trail

When a task asks you to calculate and explain, show the selected basis, formula, substitutions and interpretation. A final number without intermediate logic makes an error harder to locate and leaves explanatory subparts unanswered.

Worked example or practice scenario

For a development estimate, label the observed cumulative amount, selected cumulative development factor and ultimate result. If asked to evaluate suitability, discuss a relevant assumption such as stable development or changed case-reserving practice; repeating the multiplication does not evaluate the method.

Try this next

Practise with official released resources and your own altered examples. Recheck the sitting’s content outline and testing interface. Keep a list of errors in data basis, timing, averaging and interpretation rather than relying only on a mock score.

Reading sources

Official syllabus and resources

ActNet editorial guide · October 1, 2026 · Original illustrative examples.

0 repliesOct 1

Explanation

Exam 5: Ultimate, unpaid and IBNR are related but different

Ultimate claims describe the total expected cost. Total unpaid subtracts paid claims. IBNR on a reported-claims basis subtracts reported claims, which include paid and case reserves. A problem’s expense and recovery basis must remain consistent throughout.

Worked example or practice scenario

Ultimate claims are 1,200, paid claims 700 and case reserves 300. Reported claims are 1,000. Total unpaid is 500; IBNR is 200. The identity is unpaid = case reserves + IBNR, on this simplified consistent basis.

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Reconcile all four amounts in one row. Then ask whether the provided triangle is paid or incurred. Do not subtract case reserves again if they are already included in reported claims.

Reading sources

Official syllabus and resources

ActNet editorial guide · October 1, 2026 · Original illustrative examples.

0 repliesOct 1

Explanation

Exam 5: Volume-weighted development factors are ratios of totals

A volume-weighted age-to-age factor gives larger earlier cumulative values more influence. It is not the unweighted mean of individual ratios. Selecting a factor also requires considering distortions, maturity and the intended segment.

Worked example or practice scenario

Two origin years develop from 100 to 150 and from 900 to 990. Their factors are 1.50 and 1.10. The volume-weighted factor is (150+990)/(100+900)=1.14; the simple average is 1.30.

Try this next

Explain the difference before calculating. Then identify a large-loss scenario where volume weighting could be distorted. A mechanical average is an input to a selection, not the entire selection process.

Reading sources

Official syllabus and resources

ActNet editorial guide · October 1, 2026 · Original illustrative examples.

0 repliesOct 1

Explanation

Exam 5: On-level premium and loss trend adjust different things

On-levelling puts premium on a selected common rate basis. Loss trend projects claim costs across time. Applying one is not a substitute for the other, and the appropriate averaging periods depend on the data and policy earning pattern.

Worked example or practice scenario

If premium at an old rate level is 1m and a uniform 10% rate increase applies to a fully comparable period, on-level premium is 1.1m in this simple illustration. Separately, trended claims may increase because of severity or frequency changes.

Try this next

Create a timeline for a midyear rate change and annual policies. Explain why earned premium will contain a mix of rate levels. Avoid multiplying all premium by 1.10 when the experience already includes some of the new rate.

Reading sources

Official syllabus and resources

ActNet editorial guide · October 1, 2026 · Original illustrative examples.

0 repliesOct 1

Explanation

Exam 5: Separate indicated rate change from the chosen implementation

An overall indication adjusts experience to a comparable historical basis and projects costs to the future period. The implemented change may differ after business and regulatory consideration. Your calculation and recommendation should identify which quantity they represent.

Worked example or practice scenario

In a toy pure-premium calculation, prospective loss and expense cost is 84 per exposure, fixed expense is 6, variable expense is 20% of premium and margin is 5%. Required premium is (84+6)/.75=120. Against current premium 100, the indication is +20%.

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State every expense basis before using the denominator. Then explain why an implemented 12% change would not make the indication 12%. Calculate the residual gap and identify what assumption or decision would need documenting.

Reading sources

Official syllabus and resources

ActNet editorial guide · October 1, 2026 · Original illustrative examples.

0 repliesOct 1