SA3 chapter summaries

• Subject SA3 is designed to guide students through the course material for the 2022 exams.
• The guide is divided into two parts: the first has information specific to Subject SA3, and the second contains general information about the Specialist Advanced subjects.
• The reader should study this guide carefully before reading the course notes.

Subject SA3 – Background and Contents

• Specialist Advanced subjects are new to the Institute and Faculty of Actuaries' 2019 Curriculum.
• Subject SA3 is General Insurance Advanced.
• The Specialist Advanced subjects cover content from the Specialist Applications subjects.
• Subject SA3 replaces Subject SA3.
• Eligibility for a pass in Subject SA3 depends on:
  • Passing/exemption from the previous Subject SA3 during transfer
  • Meeting the profession's requirements based on the current curriculum.

SA3 Course Structure

• The Subject SA3 course consists of six parts, covering related topics, further divided into chapters.
• Each is followed by an assignment.
• The table in the guide shows how the parts and chapters relate and maps the chapters to the days of regular tutorials.

Subject SA3 – Syllabus and Core Reading

• Aims of the General Insurance Advanced subject are:
  • To understand complex aspects of actuarial practice in general insurance companies
  • To apply actuarial principles to the management of general insurance under complex scenarios
  • To compare approaches of applying principles across different jurisdictions
  • To recommend coherent solutions and actions for financial management of general insurance firms
• General insurance products and general business environment are 35%
• Regulatory, legislative, and taxation environment is 10%
• Reserving, capital modelling, and reinsurance is 30%
• Financial management, monitoring, and strategies is 25%
• Syllabus topics weightings indicate balance of assessment in this subject between main topics, averaged over sessions.
• Weightings correspond with learning material amount and reflect topic complexity, explanation needs, foundation understanding, prior knowledge, and application-based areas.

Syllabus Objectives

• Principal terms in general insurance need to be defined.
• Main features of general insurance markets should described:
  • Key features of the Lloyd's market must be outlined:
    • Particular considerations when pricing large commercial risks
    • Alternative approaches to rating large commercial risks
    • How to incorporate return on capital in premium rates
    • Difference between catastrophe modelling and traditional actuarial rating
    • Generic structure of a catastrophe model
    • Key perils should be suggested for modelling
    • Key uses of catastrophe models for non-life actuaries
  • Important considerations in using the output of catastrophe models
  • Non-modelled catastrophes
  • Actuarial features of annuities in non-life insurance (PPOs)
  • Possible emerging risks, disruptors and their impacts on the general insurance market must be suggested.

Regulatory, Legislative, and Taxation Environment

• Understanding over-arching Solvency II regulatory framework includes describing its background, scope, structure, governance (Pillar 2), disclosure and reporting (Pillar 3), and group reporting requirements
• The regulatory regime in Lloyd's has to be described.
• The relevance of legislation to general insurance business, related to consumer protection and equality legislation has to be explained.
• Implications of taxation of general insurance business for policyholders, general insurance companies, mutuals/proprietaries, Lloyd's syndicates/members has to be explained.
• Regulatory frameworks for insurance companies described must include regulators' objectives, supervisory tools, statutory roles, transfer of liabilities.
• The ways in which regulatory, legislative, and taxation environments affect the insurance markets and how general insurance companies act based on that has to be demonstrated.
• Actuarial standards for actuaries practicing/advising general insurance companies needed to be outlined.

Reserving, Capital Modelling, and Reinsurance

• Appropriate bases for valuing insurance liabilities of an insurer must be determined.
• This should include annual accounting/statutory returns (IFRS 17) and management accounts.
• An understanding of why different reserving techniques are required for latent/disease claims has to be demonstrated.
• Higher-order understanding of commercial/regulatory environments and their effect on reserving and capital has to be demonstrated.

Financial Management, Monitoring and Strategies

• Understanding of financial planning in general insurance management has to be demonstrated.
• Analysis of financial planning requirements of a general insurer and developing appropriate strategies should be shown.
• Appropriateness of models for financial planning, to enable an insurer to develop/monitor objectives (corporate/product level) should be evaluated.
• Understanding of general insurance portfolio transfer alternatives should be demonstrated.
• Reasons insurer might transfer a business portfolio to another insurer must be outlined.
• Alternative approaches to such a transfer, including appropriateness in different situations should be described.

Problem Solving

• Coherent solutions/actions related to financial management of general insurance firms should be recommended.
• Complex problems should be analysed in terms of actuarial, economic, and financial factors to be used, such as analytical techniques.
• The implications/relevance of such factors, integrating them, is to be assessed.
• Results are evaluated critically in wider contexts, with appropriate conclusions.
• Solutions/actions, or ranges of possible solutions/actions, should be proposed based on this evaluation.

Core Reading Notes

• Subject SA3 Course Notes include Core Reading fully integrated.
• As of Core Reading's writing (March 2021), the pandemic’s insurance industry impact is unknown
  • short-term effects of large increases in business interruption claims and a fall in motor claims will exist
  • long-term effects will depend on the economy
• Version of the reading does not address these areas.
• On January 1, 2021, the UK left the EU without an EU-wide arrangement for regulating financial services.
• Solvency II applied to UK insurers when the UK was part of the EU.
• Uncertainty over the UK/EU's financial services discussions continues
• This version assumes Solvency II continues to apply to UK insurers.

Core Reading References

• These should be checked for complete references:
  • FCA's approach to supervision
  • Insurance Conduct of Business Sourcebook (ICOBS)
  • Practising Certificates
  • Solvency II Directive
  • Solvency II
  • Solvency II
  • Lloyds of London - Solvency II
  • Insurance Capital as a Shared Asset, 2006, Casualty Actuarial Society Forum
  • ABI-Non-Modelled Risks

Further Reading

• Exams base on relevant Syllabus, Core Reading, and ActEd course material
• Main source of tuition for students
• Details in Chapter 17, titled Further Reading.

ActEd Products

• The following products are available:
  • Course Notes
  • X Assignments (six 100-mark tests, 3.25 hours allowed)
  • Series X Marking
  • Flashcards
  • ASET (2014-17 papers): four years of exam papers, eight sittings, April 2014-September 2017
  • ASET (2019-21 papers): three years of exam papers, six sittings, April 2019-September 2021
  • Mini-ASET: April 2022 exam paper
  • Mock Exam: one 100-mark test
  • Additional Mock Pack (AMP): two extra 100-mark tests
  • Mock Exam Marking
  • Marking Vouchers
• Find products available in both paper and eBook format on ActEd.co.uk.
• These tutorials are typically available for Subject SA3:
  • Regular Tutorials (three days)
  • Block Tutorials (three days). Full details are in the Tuition Bulletin on www.ActEd.co.uk.

SA3 - Skills and Assessment

• Exam questions are designed to test:
  • Knowledge: detailed knowledge and understanding
  • Application: ability to apply principles within a context
  • Higher Order: deeper analysis and assessment including actuarial judgement
• Approximate assessment split:
  • 20% Knowledge
  • 50% Application
  • 30% Higher Order
• Use of a specific command verb within syllabus objectives indicates forms of question that can be asked.
• Examiners may ask a question on a syllabus topic using any agreed command verbs.
• Specialist Advanced examinations are in the form of 3.25-hour examinations.

Frequently Asked Questions

• Advice for simultaneously studying SP7/SP8: Cover all courses quickly due to common principles.
• Necessary knowledge from earlier subjects: Subjects SP7 and SP8 (or their predecessors, ST7 and ST8), also triangulation methods (Subject CM2, previously part of Subject CT6).
• Relevant old era subject questions: All prior Subject SA3 questions are relevant to some extent; older subjects include 403, G, QG, 9A, and 9B.
• Action upon discovering an error: Check www.ActEd.co.uk/paper_corrections.html; if not dealt with, email [email protected].
• Feedback should be sent detailing errors, contradictions, and unclear statements by email to [email protected].
• Syllabus or Core Reading concerns can be passed on via ActEd, or can be emailed to [email protected] (Institute and Faculty of Actuaries' Examination Team).

Before You Start

• You need the following when studying for Actuaries' exams:
  • Formulae and Tables for Examinations of the Faculty of Actuaries and the Institute of Actuaries, 2nd Edition (2002).
  • Scientific calculator or Excel.
• Visit www.actuaries.org.uk for The Tables from the Institute and Faculty of Actuaries' eShop.

Core Study Material

• Text explains the roles for Syllabus, Core Reading, and supplementary ActEd text.
• Syllabus, produced by Institute and Faculty of Actuaries, used as integral study component
• Core Reading has objective and aims to assist tutors, students, and examiners.
• Supports the Syllabus coverage, and reinforces depth and breadth to promote a good understanding of concepts.
• Exams need to demonstrate understanding of concepts from Syllabus and Core Reading, legislation, professional guidance in force when Core Reading is published.
• Exams in April and September 2022 follows Syllabus and Core Reading from May 31, 2021.
• Examiners will have Core Reading when setting examination material for which students are recommended to work through past examination questions, utilizing additional tuition support
• Updated yearly to reflect changes in the Syllabus, reflect current practice, and in the interest of clarity.
• The Institute and Faculty of Actuaries thanks individuals that contributed to the development of the material within the Core Reading.

ActEd Text

• Core Reading covers syllabus objectives needed to pass the exam.
• Tuition material written by ActEd enhances learning via key point examples and explanations.
• Core Reading is represented in bold font.
• All study material produced by ActEd is copyright and for the exclusive use of the purchaser.
• The copyright is owned by Institute and Faculty Education Limited, which is a subsidiary of the Institute and Faculty of Actuaries.
• Prior authority needs to be granted by ActEd to hire out, lend, give out, sell, store or transmit electronically or photocopy any portion of the study