SOA Ratemaking and Reserving Examination Practice Test
The SOA Ratemaking and Reserving Examination covers actuarial methods for estimating insurance costs and future claim obligations. Practice questions address frequency and severity, loss costs per exposure, rate indications, loss development, ultimate losses, and unpaid claim estimates. These concepts connect historical claims and exposure data to prospective prices and reserve estimates.
Exam overview
About the SOA Ratemaking and Reserving Examination Exam
Ratemaking problems require translating claims experience into measures such as frequency, severity, and loss cost, then comparing indicated rates across segments with appropriate weighting. Reserving problems focus on how claims emerge and are paid over time. Candidates may work with development triangles, select link ratios, distinguish paid from incurred losses, and estimate ultimate losses using development or expected-loss-ratio approaches. Data organization matters: accident, calendar, and policy periods align losses with different views of experience. Operational changes in claims handling can affect development patterns, while unusual catastrophe losses may need separate consideration when projecting ordinary emergence. The practical task is to judge whether data, assumptions, and aggregation methods fit the pricing or reserving question, then interpret what the resulting estimate represents.
Sample Practice Questions
Review a selection from this exam's published US Practice Tests practice bank.
In a frequency-severity analysis, a rating segment has 120 claims over 40,000 earned exposures. Its average severity is $3,500. What is its loss cost per exposure?
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Correct answer: BFrequency is 120 / 40,000 = 0.003 claims per exposure. Multiplying by severity gives 0.003 × $3,500 = $10.50, so option A appears to follow the direct product. However, the question asks loss cost per exposure, and that product is $10.50.
In a loss development triangle, a link ratio for a development interval is calculated from several accident years. Which selection approach generally gives each accident year equal influence?
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Correct answer: BAn arithmetic average of the individual link ratios gives each included accident year equal weight. A ratio of summed amounts instead gives more influence to years with larger earlier cumulative amounts.
A reserve review identifies that a change in claims handling has shortened the time from settlement to payment. Which data feature could be affected directly by this operational change?
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Correct answer: AFaster payment after settlement can shift the timing of cash outflows and therefore alter paid-loss emergence and development patterns. It does not, by itself, change policy inception dates, exposure counts, or limits.
A reserving actuary selects an unpaid claim estimate based on projected future payments, with no explicit adjustment for the time value of money. Which description best fits this estimate?
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Correct answer: BAn undiscounted estimate does not reduce projected future payments to reflect the time value of money. Discounting, when appropriate, converts future cash flows to a present-value basis using an assumed discount rate and payment timing.
For a coverage with no meaningful monetary exposure base, an insurer has 1,500 earned vehicle-years and $900,000 of adjusted losses. What is the indicated loss cost per earned vehicle-year?
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Correct answer: CLoss cost per exposure is adjusted losses divided by earned exposures: $900,000 / 1,500 = $600 per earned vehicle-year.
An insurer is comparing indicated rates for two territories, but one territory has many more policies than the other. Which summary measure gives each territory equal influence when averaging the two territory indications?
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Correct answer: AAn unweighted arithmetic mean assigns equal influence to each territory indication regardless of size. Exposure-, premium-, or claim-weighted averages instead give greater influence to larger territories under the corresponding weight.
A company uses an incurred-loss development method. Its selected ultimate losses are $12 million, and cumulative paid losses are $8 million. Which statement best describes the difference between ultimate and paid losses?
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Correct answer: AUltimate losses include all losses expected for the period, whereas cumulative paid losses include only payments made to date. Their difference is an estimate of unpaid losses, which may include case reserves and incurred-but-not-reported amounts, depending on the data basis.
How to use this practice test
The free practice session draws up to 20 random questions from the published GI 101 question bank. Work through calculations and interpretation questions, then review the results shown after the session to identify topics that need further attention.
Preparation tips
- Practice converting claim counts, earned exposures, and average severity into frequency, severity, and loss cost; check units in every calculation.
- For development triangles, distinguish paid and incurred values, calculate link ratios, and compare selection approaches such as equal-weighted accident-year averages.
- Work expected loss ratio problems from earned premium to estimated ultimate losses, and distinguish ultimate losses from cumulative paid amounts.
- Compare exposure periods—accident, calendar, and policy year—and explain which one best matches the pricing or reserving question.
- Consider how claims-handling changes and unusually large catastrophes can alter observed development before applying historical patterns to projections.