The preparatory seminar for CAS Exam 7 is a four day course (8:00 am to 5:00 pm) taught by Mr Sholom Feldblum. Tuition is $485, payable to New England Actuarial Seminars. The seminar is given twice:

• At the Crowne Plaza in Rosemont, Illinois, March 1 - 4,  2009.
• At the Woodbridge Hotel and Conference Center (formerly the Sheraton Hotel at Woodbridge Place), in Iselin, New Jersey,.March 15 - 18, 2009

The Exam 7 syllabus is daunting. This exam is as the society’s gatekeeper: passing requires demonstration of excellence, because Associateship permits one to sign statements of actuarial opinion.

Statutory, GAAP, fair value, and tax accounting are new to many candidates, and they are fully reviewed in the seminar and the on-line preparatory materials. Candidates who have not worked with Annual Statement preparation, federal income tax filings, risk-based capital, and insurance regulation may find this exam overwhelming.

For optimal exam preparation, participate in the on-line Exam 7 seminar (on the NEAS discussion forums) from its inception in December 2007 through the final week of study in April 2008. 

The study aids provide thorough coverage of the more difficult material. Some brief descriptions are:

• The recommended study schedule is a comprehensive (130+ page) overview of the syllabus, indicating the sections you should focus on, the likely test questions on the coming exam, the cost-benefit relation of each topic, explanations of the more difficult subjects, and the time you should assign to each reading.
• Schedule P is enormous, with hundreds of rules for its components; even small details are tested. The study aids, "Illustrative Test Questions," "Recent Changes" and "Practice Problems and Model Solutions," have been invaluable for past candidates.
• "Federal Income Taxes for Exam 7," provides illustrative test questions, practice problems, and past CAS exam questions with comprehensive solutions. Many examiners know the IRS procedures, since they provide analyses for their companies or clients. The study aid explains the accounting rules in the new Exam 7 study notes, and it provides practice problems with model solutions. Topics include:

• Effective tax rates by asset categories (municipal bonds and dividends received)
• Loss reserve discounting with all rules in the study note
• Revenue offset and the dividends received deduction
• Loss carryovers and the minimum tax credit
• After-tax spreads: regular tax and alternative minimum income tax
• Optimal investment mix and investment strategy
• Closed claim method for estimating reserve adequacy
• The dividends received deduction, before and after proration
• Effective tax rates on asset classes: regular tax and alternative minimum income tax

• Risk-based capital is the longest and one of the most important readings on the syllabus, with three study aids: "Practice problems and model solutions to past exam problems," including past problems from the former Part 8 and Part 10 examinations; "Underwriting Risk Charges," with practice problems for reserving risk and written premium risk; and "Covariance Formula," with practice problems for combining the risk charges in the risk-based capital formula.
• Harrington and Doerpinghaus on Economics of Risk Classification translates abstract reasoning into concrete examples to clarify the views of the authors. The study aid contains dozens of illustrative test questions to ensure that candidates are well prepared for all aspects of this reading.
• SSAP 65 – Contracts: Paragraph by paragraph explanations of the eight topics in this SSAP:

• Claims Made Policies: new accounting rules for tail coverage, definite vs indefinite term
• Discounting: tabular versus non-tabular discounts and the maximum discount rate
• Structured Settlements: insurer vs claimant as payee; contingent liability; SAP-GAAP differences
• Long duration Policies: three tests for the unearned premium reserve
• High Deductible Policies: net accounting for reserves; non-admitted assets; paid loss entries
• Asbestos and Environmental Exposures: the format of the reserve disclosure
• Excess Statutory Reserve: statutory reserve no longer exists
• Policyholder Dividends: confirms the current statutory accounting rules

• SSAP 53 – Premiums: Paragraph by paragraph explanations of

• Premium deficiency reserves
• Recording of written premium on effective date vs billing date

• Accounting for earned but unbilled premiums and accrued retrospective premiums: adjustments to written premium vs earned premium

• SSAP 62 – Reinsurance: Illustrations of the risk transfer tests; GAAP vs statutory accounting for prospective vs retroactive reinsurance; statutory treatment of claims-made coverage

Insurance accounting and regulation are vast and detailed subjects. NEAS provides complete study aids, with scores of illustrative questions and answers, on Statutory Accounting, GAAP, the Insurance Expense Exhibit, Schedule F, the Statement of Actuarial Opinion, the economics of insurance regulation, socialization of risk

The CAS Exam 7 is a test of speed and endurance, not just of understanding. Even the best of candidates may not complete the exam in the allotted time. You must solve accounting problems in minutes and write clear answers to the regulation questions. Past candidates have found the illustrative test questions, comprehensive problems, and model solutions in the study aids to be exceedingly effective practice.

1. Introduction to accounting: audience and goals of accounting systems; financial statements: non-admitted assets and statutory liabilities; policyholders’ surplus versus GAAP equity; direct charges and credits to surplus; pricing for a return on capital invested in insurance operations; accounting entries and surplus
2. Insurance Expense Exhibit: surplus allocation by line of business; stocks (balance sheet) vs flows (income statement); investment income ratios; prepaid acquisition expenses; adjustments to unearned premium reserves; investment income attributable to insurance operations vs to capital and surplus funds; prospective surplus assumptions versus retrospective allocation
3. Introduction to Federal Income Taxes: proration; dividends received deduction, limits, & removal of limits; effective tax rates for municipal bonds and stockholder dividends in regular tax and AMIT environments; revenue offset
4. Conger, Hurley, Lowe on Fair Value Liabilities: objectives of fair value accounting; FASB and the International Accounting Standards Board; knowledgeable, unrelated, and willing entities; markets, proxies, and formulas; valuation levels 1, 2, and 3; reliability, relevance, comparability, and transparency of financial statements; valuation methods: market, income, and cost; risk-free rate and risk adjusted rates; litmus tests; risk margins; fair value projects

1. CPCU on typology of insurance law: Tort law; negligence; duty to plaintiff; "but for" rule; reckless misconduct; substantial factor rule; the foreseeability rule; negligence per se; res ipsa locitur; imputed negligence; vicarious liability; negligent entrustment; negligent supervision; contributory versus comparative negligence;"X percent" rule; last clear chance; assumption of risk; hold-harmless agreements; exculpatory agreements; breach of warranty; proximate cause; tortfeasor defenses; toxic torts and environmental damage; CERCLA; hazardous activities; punitive damages; joint tortfeasors; UCAJTFA; active-passive negligence; expanded liability; enterprise liability; alternative liability; market share liability; tortfeasor’s capacity; good Samaritan laws; statutes of limitation and repose
2. Keeton on trends in tort law: sovereign (public official) immunity; charitable immunity; intra-family immunity; no-duty rules; guest statutes; professional duty; standards of care; res ipsa locitur; liability in excess of policy limits; pain and suffering; punitive damages; alternatives for tort law; partial tort exemptions; verbal vs dollar standard; pros and cons of the tort system; no-fault experience; 6 premises & 3 combinations; cost increases; reductions in predictability
3. RAND study on trends in tort litigation: Extent of litigation; growth patterns and types of litigation; stability of jury awards; litigation costs; routine personal injury torts; high stakes personal injury torts; mass latent injury torts

1. Underwriting and Investment Exhibit: premium & loss accounting; Notes to Financial Statements; asbestos and pollution disclosures; assets
2. Biggs on Effective Asbestos Reform: proposed regulation
3. Federal Income Taxes: statutory, GAAP, and taxable income; loss reserve discounting; using Schedule P to calculate discount factors; company versus industry payment patterns; determination years; federal mid-term rates; long_tailed lines; integrating underwriting income and investment income; changes in operating income, capital gains, and yield rates

1. Rejda on social security financing: Partial reserve financing; actuarial soundness; actuarial deficits; OASDI versus Medicare; short-range and long-range financial outlooks
2. Greene on government insurers: Flood insurance, nuclear energy, export credit ; federal loan; federal property; FAIR plans and riot plans; crime; OASDHI; unemployment insurance; workers’ compensation; state funds; temporary disability income; Maryland state fund; state property plans; insurance guaranty funds; government pensions; residual markets; collateral social purpose; nine implications and four conclusions
3. Jenkins on National Flood Insurance Program
4. Barlett, Klein, and Russell on socialization of insurance costs: Rationale for socialization; exit barriers in New Jersey and Massachusetts; restrictions on risk classification; switching costs; residual markets; voluntary cross subsidization; assessment life insurance and adverse selection; health insurance and community rating; labor unions vs management; Essential Insurance Act and territorial rating; six characteristics of EIA; justification of EIA; insurer competition in private passenger automobile; results by coverage; success or failure of EIA
5. Hamilton and Ferguson on shared markets: Flood insurance; FAIR plans; beach and windstorm plans; automobile insurance plans; reinsurance facilities; joint underwriting facilities

1. Investment Income: asset valuation (statutory vs. GAAP); flow of bond amortization through the Underwriting and Investment Exhibit
2. Schedule P (1,2,3,4): current valuation vs. historical exhibits; calendar year, accident year, exposure year, and policy year; computational columns vs memoranda columns; distribution of adjusting and other expenses (ULAE) to accident years – new rules; defense and cost containment expenses (ALAE); inter_company pooling agreements: occurrence vs claims_made policies; tabular vs. non_tabular discounts; net of discount vs. gross of discount historical exhibits; anticipated salvage and subrogation recoverable
3. Schedule P (IRIS tests + Parts 5, 6, 7): reserve adequacy tests; retrospective tests 9 and 10; prospective test 11; Part 5 claim counts; Part 6 premium development; premium reconciliation (Parts 1 & 6); accrued retrospective premiums; Part 7 loss_sensitive contracts; six-fold definition of loss sensitive contracts; quantifying premium sensitivity; two quantification methods

1. Gorvett, Tedeschi, and Ward, on Special Issues and Data Sources
2. Brady on insurance regulation
3. Wagner on Insurance Rating Bureaus: cartel pricing; Merritt committee; anti-compact laws; restraints on prices and commissions; SEUA and McCarran-Ferguson; state rate regulation; stock vs mutuals; model rating laws; bureau consolidation; attorney generals’ anti-trust suit; for-profit rating bureaus

1. Statutory vs. GAAP accounting: SFAS 115 bond valuation; held for trading purposes, available for sale, and held to maturity; deferred taxes on unrealized capital gains; deferred tax assets for revenue offset and loss reserve discounting; deferred policy acquisition costs; premium deficiency reserves; policyholder dividends; offsets to receivables; accrual accounting for contingent commissions; SFAS 113 and gross accounting; SEC and NYSE reporting
2. Reinsurance accounting: schedule F; unauthorized and slow-paying reinsurers; aging schedule; overdue recoverable and amounts in dispute; collateralization; Part 8 restatement of the balance sheet; comparison of Schedule F, Part 8, with SFAS 113

1. Musulin on computer modeling: Computer cat models; regulatory implications; proprietary information problem; Florida Commission
2. Harrington on Insurance Rate Regulation: Price fixing; prior approval; competitive rating; consumer protection; advantages of open competition over prior approval
3. A. M. Best’s on Excess and Surplus Lines
4. A. M. Best’s on Business as Never Before: HMO disputes; diminished value; World Trade Center; asbestos claims; modal premium litigation; punitive damages; Spitzer probes
5. Ghezzi on redlining: HUD; NAIC; implications for pricing actuaries; implications for underwriting; geographic mix of business

1. Risk-based capital structure: NAIC and AAA; Butsic’s six risk categories; insurance affiliates; overseas subsidiaries; insurance subsidiaries; pass-through investment subsidiaries (special purpose subsidiaries); off-balance sheet risks; fixed income securities; adjustments to the bond charges; three reasons for reduced equity charge; reinsurance risk; intercompany pooling; accuracy, simplicity, and incentives; level_playing field, objectivity, and discrimination
2. Underwriting risk charges: adverse reserve development; implicit interest discounts; loss concentration factor; triple dis-incentives; diversification; tabular vs non-tabular discounts; written premium risk; premium concentration; claims made offset; loss-sensitive contracts; growth charges
3. Covariance formula: square root rule; insurance subsidiaries; surplus adjustments (discounts); marginal surplus requirements; effect on asset risk charges
4. OSFIC on Minimum Capital Test

1. NAIC on competitive rating: Rate regulation and price competition; pricing flexibility; availability, affordability, and equity; "skimming the cream"; comparison shopping; competitive rating laws; legislative versus regulatory functions; major exceptions: workers’ compensation; title; credit property; residual markets; joint underwriting and joint reinsurance
2. Williams on excess profits statutes: Windfall profits statutes; excess profits statutes; excess profit threshold; short run fluctuations; Florida statute; NY statute; short run fluctuations; pros and con of excess profit statutes

1. Tax liabilities: statutory vs taxable income: four major differences; alternative minimum taxable income; two methods of adjusting: reserve discount vs discounted reserves; net UEPR vs equity in UEPR;AMIT credit; ACE adjustment; maximizing net after tax income.
2. Harrington and Doerpinghaus on personal automobile class systems: Direct and indirect efficiency; social welfare (economists) vs class homogeneity (actuaries); elasticity of demand for auto insurance; costly classification; uninsured motorists; ambiguous social gains; consumer sorting; imperfect equilibria; market dislocations; residual markets; assigned risk vs reinsurance pools and JUA’s; consumer fraud and claims handing efficiency; economic regulation; interest group pressures; attorney involvement

1. Ettlinger on state ratemaking: Rate regulation; rate filings; class systems; individual risk rating; statistical agents; rating bureaus; SEUA decision; antitrust; underwriting cycles
2. NAIC model rating law: types of rating laws; competition vs prior approval; file and use vs use and file

1. NAIC Practices and Procedures Manual, Preamble: objectives of codification; consistency among states; GAAP vs statutory audiences; balance sheet vs income statement emphases
2. SSAP 53: Premiums: written premium reporting; workers’ compensation vs other lines; pre-and post-codification requirements; earned but unbilled premiums; audit premiums; accrued retrospective premiums; adjustment to written premium vs adjustment to earned premium; premium deficiency reserves; endorsements
3. SSAP 65: Contracts: claims-made forms; tail coverage (extended reporting provision); definite vs indefinite term; UEPR vs bulk loss reserve; tabular discounts, indemnity, medical, vs LAE; maximum statutory non-tabular discount; Treasury durations; 150 basis point margin; structured settlements; owner vs measuring life vs payee; insurer vs claimant payee; contingent liability; deductible plans; net reserving; timing of the accruals; non-admitted asset and 10% rule; asbestos and pollution disclosure; long duration property-casualty policies; policy year aggregate; run-off of insurance protection; three tests for unearned premium reserve
4. SSAP 62: Reinsurance: legal right of offset; risk transfer tests; underwriting, timing, investment risks; reasonable chance of significant loss; recoverables on paid vs unpaid losses; contra-liability vs assets; prospective vs retroactive reinsurance; claims-made contracts and retroactive treaties; lead reinsurers; 9 month rule

1. Financial regulation: NAIC zone system; state accreditation; IRIS ratios and exam scheduling; profitability tests; liquidity tests; retrospective and prospective reserve adequacy test
2. Statement of Actuarial Opinion and ASB #36: recent changes; COPLFR and the AAA Practice Note; actuarial opinion vs. actuarial report; qualification of the actuary; exemptions; loss versus ALAE; gross versus net losses; six considerations; unearned premium reserves for long-duration contracts; retroactive reinsurance and special surplus; extended loss and expense reserves; underwriting pools & associations; tri-fold definition of financial reinsurance; loss reserve discounts; uncollectible reinsurance recoverable and three tests by signing actuary; anticipated salvage and subrogation; further guidance in the Actuarial Standard of Practice
3. Wilcox on Guaranty funds: post-assessment vs pre-assessment funds; guaranty fund premiums; benefit limits; loss of risk protection; assumption reinsurers; insufficiency of funds; assessment capacity; speed of resolution; duration to closing; length of moritoriums; workers’ compensation issues; payment limitations; strains on capacity

Samples