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SOA - Examination and Other Requirement Details

Spring 2007 Basic Education Catalog


Examination and Other Requirement Details

Individual Life and Annuities Company/Sponsor Perspective (CSP) Exam Spring 2007

This examination consists of six hours of written–answer questions. A read–through time will be given prior to the start of the exam, 15 minutes in the morning session and 15 minutes in the afternoon session. This course is administered as Individual Life and Annuities U.S.–Company/Sponsor Perspective (CSP–IU) and Individual Life and Annuities Canada–Company/Sponsor Perspective (CSP–IC), each of which has its own reading list and national concentration. Candidates will write one of these exam.

Learning Objectives:

    1. TOPIC:  Financial Reporting
      The candidate will understand the preparation of financial statements and reports of U.S. life insurance companies and be able to analyze the data in them.

      Learning Outcomes:
      The candidate will be able to:

      1. Prepare the basic financial statements for a life insurance company under U.S. GAAP, U.S Statutory and U.S. Tax methods and regulations.
      2. Describe the structure of the U.S. Annual Statement and explain the purpose of its statements, key exhibits and schedules.
      3. Describe how to compute the taxable income of a life insurance company
      4. Explain fair value accounting principles
         
      5. Explain the appropriate accounting treatments for:
        1. Separate Accounts
        2. Embedded options (FAS 133)
        3. Derivatives
        4. Secondary guarantees (AG 38, SOP 03–1)
        5. Internal Replacements (SOP 05–1)  
         
      6. Describe international accounting standards

    2. TOPIC:  Principles of Valuation
      The candidate will be able to understand and apply valuation principles of individual life insurance and annuity products issued by U.S. life insurance companies.


      Learning Outcomes:
      The candidate will be able to:


        1. Describe, compare, and contrast valuation methods under the following standards:

          1. U.S. statutory

          2. U.S. GAAP

          3. U.S. tax

          4. Canadian valuation system

          5. Fair value accounting

           

        1. Select appropriate valuation assumptions under the following standards:
          1. U.S. statutory

          2. U.S. GAAP

          3. U.S. tax

          4. Fair value accounting

           

        1. Compute liabilities under U.S. statutory, U.S. tax, U.S. GAAP, and DAC assets under U.S. GAAP for the following products:
          1. Traditional life insurance

          2. Term life insurance

          3. Universal life insurance

          4. Universal life insurance with secondary guarantees

          5. Deferred annuity

          6. Payout annuity

          7. Variable annuity with guaranteed minimum death benefits

          8. Variable annuity with guaranteed living benefits

          9. Equity–indexed annuities

          10. Equity–indexed life insurance

          11. Variable life insurance with guaranteed minimum death benefits

          12. Rider
           

      1. Devise and use reserve audit methods
      2. Describe and calculate Investment Maintenance and Asset Valuation Reserves
      3. Describe concepts underlying SVL II (principle–based reserves)

    1. TOPIC:  Reinsurance

      The candidate will be able to evaluate various forms of reinsurance, what the financial impact is of each form, and describe the circumstances that would make each type of reinsurance appropriate.


      Learning Outcomes:
      The candidate will be able to:


        1. For traditional and financial reinsurance, explain the consequences and calculate the effect on both ceding and assuming companies with respect to:

          1. risk transfer

          2. cash flow,

          3. financial statements

          4. tax, and

          5. reserve credit requirements

           

      1. Describe what considerations would be examined to determine the appropriate reinsurance form from the ceding and assuming company perspectives

    1. TOPIC:  Financial and Capital Management

      The candidate will be able to explain and apply the basic methods, approaches and tools of financial management in a life insurance company context

      Learning Outcomes:
      The candidate will be able to:



      1. Describe and calculate basic performance measures
      2. Perform basic financial analysis by product line and total company
      3. Explain and create a product line “gains by source” analysis
      4. Apply methods of valuation to business and asset acquisitions and sales
      5. Explain and apply the basic methods and approaches of surplus management and earnings management
      6. Describe and apply the methods of capital allocation and investment decision analysis under a financial economics options pricing perspective
      7. Describe how securitization is used within capital management
       

    1. Topic:  Financial and Capital Management

      The candidate will understand the Risk Based Capital (RBC) regulatory framework and the principles underlying the determination of Regulatory RBC.
        

      Learning Outcomes:
      The candidate will be able to:


      1. Describe the US Risk Based Capital (RBC) regulatory framework and the principles underlying the determination of Regulatory RBC

      2. Compute RBC for a life insurance company, including:

        1. Identification of significant risk components

        2. Identification of specialized product RBC requirements

        3. Interpreting results from a regulatory perspective
         

    1. TOPIC: Financial and Capital Management
      The candidate will understand the principles underlying the determination of Economic Capital.

      Learning Outcome:
      The candidate will be able to:


      1. explain and apply the concepts, approaches and methods for determining Economic Capital
       

    1. TOPIC:  Embedded Value, and Value Creation

      The candidate will understand embedded value, and value creation conceptual frameworks

      Learning Outcomes:
      The candidate will be able to:

      1. Explain and apply the methods and principles of embedded value
      2. Describe and apply the principles of how insurance companies create value from a financial economics perspective
       

    1. TOPIC:  Model Office and Asset/Liability Modeling

      The candidate will be able to integrate data from various sources into model office and asset/liability models

      Learning Outcomes:
      The candidate will be able to:


        1. For an ALM model:
          1. Select appropriate assumptions and scenarios
          2. Model dynamic behavior of both assets and liabilities
          3. Model and explain various strategies, including hedging
          4. Analyze and evaluate results
          5. Recommend appropriate strategies

             
           
        2. Apply a model office process and make appropriate recommendations.
        3. Analyze and explain actual vs. projected differences
           

      1. Explain limitations of models and possible sources of error
        1. Quality of data
        2. Granularity of the model
         
       

    1. TOPIC:  Risk Management and Mitigation

      The candidate will understand the sources of risk faced by the enterprise and evaluate the mitigation thereof.

      Learning Outcomes:
      The candidate will be able to:

      1. Identify, categorize and evaluate potential sources of risk in products including but not limited to mortality, morbidity and lapse.
      2. Identify, categorize and evaluate potential sources of risk in investments including but not limited to credit risk, liquidity and asset–liability matching.
      3. Describe and evaluate the other risks an insurance company faces including operational, marketplace and expense risks.
      4. Describe how risks (e.g. product, investments and operational) and opportunities interact and how they influence firm strategy.
      5. Describe and apply methods of risk mitigation and hedging and to understand the limitations of such methods.
      6. Evaluate methods for measuring and controlling equity–based exposure associated with embedded options.
      7. Describe the roles of rating agencies, analysts and regulators together with their methods and impact on insurance companies.
       

  1. TOPIC:  Professional Considerations

    The candidate will understand the professional standards addressing financial reporting and valuation.

    Learning Outcomes:
    The candidate will be able to:


    1. Explain the role and responsibilities of the appointed/valuation actuary.
    2. Identify and apply relevant professional actuarial qualification standards.
    3. Identify and apply actuarial standards of practice relevant to financial reporting and valuation .
    4. Explain the actuary’s professional responsibilities to stakeholders including obligations under Sarbanes-Oxley
     

U.S. Textbooks for Individual Life and Annuities CSP Exam

Life, Health & Annuity Reinsurance, Tiller, J.E., Tiller, D.F., Third Edition, 2005, ACTEX, Chapters 4–6, 10–12, 14

Life Insurance Products and Finance, Atkinson, D., Dallas, J., 2000, SOA, Chapters 14–16
Real Options, Trigeorgis, L., 1996, MIT Press, Chapters 1 (exclude 1.3), 2, 4 (4.1–4.5 only), 5 (5.1, 5.2, 5.5 only)

U.S.GAAP For Life Insurers, Herget, T., Second Edition, 2006, SOA, Chapters 1–9, 13 (exclude 13.7), 14, 18 (exclude 18.4), 19
Valuation of Life Insurance Liabilities, Lombardi, L.J., Fourth Edition, 2006, ACTEX, Chapters 1, 2, 4–12, 15, 16

 

U.S Textbooks for individual life and annuities CSP exam  that may be available as study notes. Check this page for updates.


Life and Accident and Health Insurance Accounting, IASA, Fourth Edition, Chapters 8(pp.12–16 only), 12 (pp.1–15 and 32–33 only):  ILA–C800–07

Insurance Industry Mergers and Acquisitions, Toole, J., Herget., T. 2005, SOA, Chapters 4(4.1–4.6 only):  ILA–C106–07

The New Corporate Finance: Where Theory Meets Practice, Chew, D., Third Edition, 2001, Irwin/McGraw Hill, Chapters 29 and 31: ILA–C108–07 and ILA–C115–07

U.S. Tax Reserves for Life Insurers, Robbins, E.L., Bush, R.N., 2006, SOA, Chapters 2, 7:  ILA–C802–07

 

Textbooks for individual life and annuities CSP exam–Cananda

Canadian Insurance Taxation, PriceWaterhouseCoopers, Second Edition, 2000, Butterworths Canada LTD, Chapters 1, 2, 7–10, 27, Background only. Chapters 3–6, 11, 28, 31

Life, Health & Annuity Reinsurance, Tiller, J.E., Tiller, D.F., Third Edition, 2005, ACTEX, Chapters 4–6, 11

Life Insurance Products and Finance, Atkinson, D., Dallas, J., 2000, SOA, Chapters 14–16

Real Options, Trigeorgis, L., 1996, MIT Press, Chapters 1 (exclude 1.3), 2, 4 (4.1–4.5 only), 5 (5.1, 5.2, 5.5 only)

Valuation of Life Insurance Liabilities, Lombardi, L.J., Fourth Edition, 2006, ACTEX, Chapters 1, 16

 

Textbooks for individual life and annuities CSP exam–Canada that may be available as study notes. Check this page for updates

 

Insurance Industry Mergers and Acquisitions, Toole, J., Herget., T. 2005, SOA, Chapters 4(4.1–4.6 only):  ILA–C106–07

The New Corporate Finance: Where Theory Meets Practice, Chew, D., Third Edition, 2001,  Irwin/McGraw Hill, Chapters 29 and 31:  ILA–C108–07 and ILA–C115-07

 

Individual Life and Annuities CSP Online Readings–U.S.

The Online readings listed below are part of the required Course of Reading for this Exam.  These readings are articles that are available online from the SOA, CCA, CIA, AAA and the ASB.



ILA CSP Online Readings–Canada

The Online readings listed below are part of the required Course of Reading for this Exam. These readings are articles that are available online from the SOA, CCA, CIA, AAA and the ASB.

 

Individual Life and Annuities Study Note Listing

The study notes listed below are part of the required Course of Reading for this exam. These Study Notes are not available electronically and must be ordered by using the
Study Note Information Form PDF located on the Study Note Information Page. Candidates should be sure to check this site periodically for additional corrections or notices.


  U.S. & Canada      
ILA–C100–07 Financial Reporting Developments–Accounting for Derivative Instruments and Hedging Activities: A Comprehensive Analysis of FASB Statement 133, as Amended and Interpreted (Overview and appendix C only) formerly 8FE–412–05
ILA–C101–07 IASB IFRS 4 AND IAS 39–Insurance and Investment Contracts: Assessing the Implications of Phase 1 for Insurers (pages 9–20 only)  
ILA–C102–07 Actuarial Review of Reserves and other Annual Statement Liabilities formerly 8I–303–00
ILA–C103–07 Valuation of Segregated Fund Maturity Guarantees Using Binomial Trees formerly 8E–321–04
ILA–C104–07 Valuation of Living and Death Benefit Guarantees for Variable Annuities formerly 8IU–310–04
ILA–C105–07 Value– Based Financial Measurement formerly 8I–304–00
ILA–C106–07 Chapter 4 of Insurance Industry Mergers & Acquisitions  
ILA–C107–07 Securitization of Life Insurance Assets and Liabilities formerly 8FE–414–05
ILA–C108–07 Chapter 31 of The New Corporate Finance  
ILA–C109–07 Specialty Guide on Economic Capital formerly 8E–706–04
ILA–C110–07 The Economics of Insurance How Insurers Create Value For Shareholders  
ILA–C111–07 Asset Liability Management for a Going Concern formerly 8V–303–00
ILA–C112–07 Asset–Liability Management for Insurers formerly 8V–316–02
ILA–C113–07 Asset/Liability Management formerly 8FE–316–02
ILA–C114–07 Life Insurance Forecasting and Liability Models: An Examination of the Trade–offs Involved with Certain Modeling Decisions formerly 7P–43–04
IILA–C115–07 Chapter 29 of The New Corporate Finance  
ILA–C116–07 Mapping of Life Insurance Risks: AAA Report to NAIC formerly 8E–704–04
ILA–C117–07 Moody's Looks at Risk Management & The New Life Insurance Risks formerly 8E–705–04
ILA–C118–07 Regulator's Perspective on Actuarial Opinions and Valuations formerly 8IC–308–00
ILA–C119–07 Chapter 19 of Life and Accident and Health Insurance Accounting formerly 8I–309–01
ILA–C120–07 SEC Implements Internal Control Provisions of Sarbanes–Oxley Act; Adopts Investment Company R&D Safe Harbor formerly 8E–703–04

  U.S. Only      
ILA–C800–07 IASA Life and Accident and Health Insurance Accounting Chapters 8 pp. 12–16 and 12 pp 1–15 & 32–33  
ILA–C801–07 State and Local Taxation of Life Insurance Companies in the United States formerly 343–23–96
ILA–C802–07 Chapters 2 and 7 of US Tax Reserves for Life Insurers  
ILA–C803–07 NAIC Standard Valuation Law  
ILA–C804–07 NAIC Actuarial Opinion and Memorandum Regulation  

  Canada Only    
ILA–C600–07 Session 3602: CICA 3855–Accounting, Capital, and Reserving Implications of Market Value Accounting
ILA–C601–07 Session 3606: Recent Developments in International Accounting
ILA–C602–07 CIA Report of the Task Force on Actuarial Liability Consistency
ILA–C603–07 OSFI Guideline D–9 –Source of Earning Disclosure (Life Insurance Companies)
ILA–C604–07 PD #8: Source of Earnings And Disclosure
ILA–C605–07 D7: Earning Volatility and Canadian GAAP
ILA–C606–07 OSFI Guideline - Minimum Continuing Capital and Surplus Requirements (MCCSR) For Life Insurance Companies
ILA–C607–07 Session 2607: OSFI Updates
ILA–C608–07 PD #11: Risk Based Capital (RBC) and Solvency: Where Do We Stand?
ILA–C609–07 Canadian Institute of Actuaries OSFI Submission: Future Direction of Insurance Capital Rules, March 2005
ILA–C610–07 PD#4: Economic Capital
ILA–C611–07 Office of the Superintendent of Financial Institutions– Guideline E15: Appointed Actuarial Legal Requirements, Qualifications and External Review, Draft March 2006
ILA–C612–07 Assurance and Related Services Guideline-AuG–43: Audit of Policy Liabilities of Insurance Companies
ILA–C613–07 PS#12: Role of the Appointed Actuary (Joint Session)
ILA–C614–07 Office of the Superintendent of Financial Institutions: Memorandum To The Appointed Actuary on the Report on the Valuation of Life Insurance Policy Liabilities, 2005
ILA–C615–07 OSFI Guideline E–12: Inter–Segment Notes for Life Insurance Companies