CAS Exam 7 Practice Questions - CAS Exam 7 Policy Liabilities, Valuation & ERM Exam - CAS Exam 7 Practice Questions - CAS Exam 7 Policy Liabilities, Valuation & ERM Exam

Question 1

Which of the following best describes the Mack chain ladder method as a stochastic reserving technique?

A fully parametric model that assumes incremental losses follow a log-normal distribution A distribution-free model that reproduces chain ladder reserves and supplies prediction error estimates A Bayesian credibility model that requires prior distributions for each accident year A bootstrap procedure that simulates pseudo-triangles by resampling unscaled residuals

Correct Answer:

A distribution-free model that reproduces chain ladder reserves and supplies prediction error estimates

Question 2

Mack's three core assumptions for the chain ladder model include all of the following EXCEPT:

Expected cumulative losses in column j+1 are proportional to those in column j Cumulative losses for different accident years are independent The variance of cumulative losses in column j+1 is proportional to the cumulative loss in column j Incremental losses are independently and identically log-normally distributed

Correct Answer:

Incremental losses are independently and identically log-normally distributed

Question 3

Mack decomposes the mean squared error of the reserve estimate into two components. They are best described as:

Process variance and parameter (estimation) variance Aleatory uncertainty and demand surge Tail-factor risk and operational risk Quantile risk and prior misspecification risk

Correct Answer:

Process variance and parameter (estimation) variance

Question 4

An actuary computes Mack's age-to-age factor variance estimator sigma squared for development period j. Which formula is correct?

sigma squared sub j = (1/(I-j-1)) * sum over i of C sub i,j * (f sub i,j - f hat sub j) squared sigma squared sub j = (1/(I-j)) * sum over i of (C sub i,j+1 - C sub i,j) squared sigma squared sub j = mean squared development factor minus one sigma squared sub j = product of historical age-to-age factors minus the mean

Correct Answer:

sigma squared sub j = (1/(I-j-1)) * sum over i of C sub i,j * (f sub i,j - f hat sub j) squared

Question 5

When the latest development period only has one observation, Mack's standard variance estimator cannot be computed. The most common practical fix is to:

Set sigma squared for the tail to zero and ignore tail uncertainty Extrapolate sigma squared sub j using sigma squared sub I-2 squared divided by sigma squared sub I-3 Use the bootstrap variance from the prior development period as a substitute Replace the tail factor with the industry average from a Schedule P benchmark

Correct Answer:

Extrapolate sigma squared sub j using sigma squared sub I-2 squared divided by sigma squared sub I-3

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Prepare with the CAS Exam 7 Practice Questions - CAS Exam 7 Policy Liabilities, Valuation & ERM Exam practice quiz. This question bank includes 100 questions covering capital, insurer, value, mack, and allocation. Use it to review important concepts, identify knowledge gaps, and build confidence for the related exam, course, or assessment.

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CAS Exam 7 Practice Questions - CAS Exam 7 Policy Liabilities, Valuation & ERM Exam

This practice set contains 100 questions from the matching question bank and focuses on capital, insurer, value, mack, and allocation. Work through each question carefully, review the provided solutions, and revisit topics that need more study before your next attempt.

This is an independent study resource intended for practice and review; it is not an official examination or an endorsement by any organization named in the title.

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CAS Exam 7 Practice Questions - CAS Exam 7 Policy Liabilities, Valuation & ERM Exam

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