Changes to FSA Requirements in 2023: What it Means for the GI Track
By Anthony Cappelletti
Last year, the SOA investigated a plan for reducing FSA exam requirements by two hours. The curriculum committee for each track drafted revised exam syllabi that would accomplish this. In March of this year, the SOA Board approved the plan to begin with the Spring 2023 administration of exams. The Board made a decision to defer the announcement until after the Spring 2022 exams. This was done so that candidates writing Spring 2022 exams wouldn’t be distracted. The Board’s motivation for this reduction of exam hours and content is to make the pathway to designations more efficient for candidates. In this article, I delve into how this plan specifically affects the GI track and candidates on their way to getting the FSA designation through the GI track.
Background
Currently, fellowship exams generally consist of two 5 hour written answer (WA) exams on core topics and a 2 hour WA exam on specialty topics. The GI track follows this 5/5/2 structure of exam hours for the three track exams. But there is one difference. It has an additional exam requirement—a 1.5 hour multiple-choice (MC) exam, Introduction to General Insurance.
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The GI track is not the only track that goes beyond the 5/5/2 structure. The Retirement Benefits track (RET) for U.S. candidates has two Enrolled Actuaries multiple-choice exams, totaling 6.5 hours of exam time, in place of one of the 5-hour exams. The Corporate Finance and ERM (CFE) track has a 4-hour ERM exam in place of a 2-hour exam. The 4-hour ERM exam consists of 3 hours on core ERM topics and 1 hour in a reading extension selected by the candidate.[1] Candidates in tracks other than CFE, may substitute their track’s 2-hour specialty exam with the 4-hour ERM exam. Passing the 4-hour ERM exam instead of the 2-hour specialty exam enables a candidate to obtain the Chartered Enterprise Risk Analyst (CERA) designation in addition to the FSA designation. |
The plan to reduce exam time by two hours was not to simply reduce exam hours. It must be accomplished by a reduction to the syllabus of readings and topics covered in the exams. The curriculum committee for each track developed a plan to accomplish this.
The SOA Board’s preference was to have an exam structure with two 3.5 hour exams and one 3 hour exam, which is what the GI track is doing. One benefit of this to candidates is that they will no longer have to take a 5-hour exam with no scheduled breaks.
The SOA Board’s directive also included the stipulation that the 4-hour ERM exam be reduced to three hours in length through elimination of the reading extensions.
Additionally, the ERM exam will no longer be an option as a substitute for the 2-hour track exam. GI candidates will now be required to take the ERM exam in addition to their track’s fellowship requirements if they want to obtain the Chartered Enterprise Risk Analyst (CERA) designation in addition to the FSA designation
The Current GI Track
Before going into the changes, it is helpful to review the current requirements specific to the GI track.[2]
The current GI track includes the following exams:
- Introduction to General Insurance (INTRO) Exam—A 1.5-hour MC exam covering topics such as GI coverages, policies, underwriting, claims, risk control, reinsurance, and regulation.
- Ratemaking and Reserving (RR) Exam—A 5-hour WA exam including both the fundamentals and some advanced methodologies in GI reserving and ratemaking.
- Financial and Regulatory Environment (FRE) Exam—A 5-hour WA exam covering topics such as financial reporting, insurer financial health, responsibilities of the actuary, regulation, and law. FRE is a nation specific exam. Credit for FRE may be obtained by passing either the U.S. version (FREU), or the Canadian version, (FREC).[3]
- Advanced Topics in General Insurance (ADV) Exam—A 2-hour WA exam covering a wide variety of advanced topics such as stochastic reserving, risk margins, excess loss coverages, and advanced ratemaking.
In addition to the exam requirements, the GI track includes the following e-Learning modules:
- Financial Economics (FE) Module[4]—A module covering various topics in financial economics that have relevance to GI.
- Applications of Statistical Techniques (AST) Module—A module covering an assortment of statistical techniques used by GI actuaries.
- ERM Module—A module covering numerous ERM topics. The ERM Module is used by all tracks as a requirement for fellowship.[5]
Reducing Exam Hours in the GI Track for 2023
Reducing exam time by two hours required identifying material to remove from the syllabus. This could be accomplished by either of the following options:
- Deleting some exam topics/readings, or
- moving some exam topics/readings to the modules and deleting some module topics/readings.
The first decision made by the GI curriculum committee was that the INTRO exam would be left unchanged. GI involves a great variety of unique coverages. This multiple-choice exam provides candidates with a good overview of GI coverages and the operations of general insurers. That left the removal of two hours of exam time from the two 5 hour exams, RR and FREU, and the 2 hour exam, ADV.
Since the SOA’s introduction of the GI track in 2012, changes to the syllabus were minor—mainly limited to updates. The reason for this was that the SOA was seeking recognition of GI track FSAs as being qualified to sign Statements of Actuarial Opinion (SAOs) for U.S. Property and Casualty (P/C) insurer Annual Statements. Both the National Association of Insurance Commissioners (NAIC) and the American Academy of Actuaries (AAA) were approached. The syllabus needed to remain constant during this process so that there wouldn’t be a “moving target” for review.
In 2019, the NAIC recognized the GI track by including FSAs in the GI track as an accepted actuarial designation for signing the NAIC P/C SAO. In 2021, the AAA recognized the GI track by amending section 3.1.1.2 of the U.S. Qualification Standards to include GI track FSAs. NAIC recognition requires that the GI track FSA pass ADV and the U.S. version of FRE (FREU).
The NAIC review of the GI track provided the curriculum committee guidance as to which topics and readings were required to be included in the GI track syllabus to maintain recognition.
From 2012 to 2022, the SOA made numerous changes to the ASA requirements. Some of them were significant. But it was the more recent changes to the ASA requirements that provided the GI track committee with the path to reduce exams by two hours in 2023. This mainly stemmed from the introduction of the following ASA requirements:
- Statistics for Risk Modeling (SRM) Exam
- Predictive Analytics (PA) Exam
- Advanced Topics in Predictive Analytics (ATPA) Assessment
SRM, PA and ATPA created redundancies with a significant amount of the material in the AST Module. Additionally, the FE Module contains several sections on topics that are less relevant to GI actuaries or are adequately covered in the Validation by Educational Experience (VEE) requirements.
Being able to remove numerous topics covered in both the AST and FE Modules meant that Option (B) would be the primary means for reducing exam hours in the GI track. Some current modules sections would be deleted and replaced by content from the exams. As a result, very little relevant material was completely removed from the pathway.
The GI Track for 2023
The following table is an overview of the changes to GI track fellowship requirements for 2023:[6]
| CURRENT REQUIREMENTS | 2023 REQUIREMENTS | CHANGES |
| INTRO 1.5-Hour MC Exam |
INTRO 1.5-Hour MC Exam |
No changes |
| RR 5-Hour WA Exam |
RR 3.5-Hour WA Exam |
Reduction of exam time by moving some syllabus topics to the ADV exam and the revised AST Module. |
| FRE 5-Hour WA Exam |
FREU 3.5-Hour WA Exam |
Reduction of exam time by moving some syllabus topics to the ADV exam and the FRL Module (replacement of the FE Module). |
| ADV 2-Hour WA Exam |
ADV 3-Hour WA Exam |
Added topics from both the RR and FRE Exams to ADV. Moved one current ADV reading to the GIA Module (replacement of the AST Module). |
| FE Module | FRL Module | Removed topics in current FE Module that were no longer required and added regulation and law topics from the FREU Exam. FE Module renamed Financial Economics, Regulation and Law (FRL) Module to better reflect content after the revisions. |
| AST Module | GIA Module | Removed topics in current AST Module that were no longer required and added some topics from the RR and FREU Exams. AST Module renamed General Insurance Applications (GIA) Module to better reflect content after the revisions. |
| ERM Module | ERM Module | No changes |
The overview provides an idea of the changes made but it lacks details. I’m sure some of you want the details so I’ll provide it here.[7] (Feel free to skip the following table if you don’t want the details.)
Requirement |
Changes for 2023 |
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RR Exam Reduce from 5 hours to 3.5 hours |
Topics moved into ADV |
Estimating ultimate claims by layer, specialized ratemaking topics, some reinsurance topics, and funding allocation for self-insurers. |
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Topics moved into GIA |
Premium liabilities, risk classification, monitoring results and catastrophe modeling. |
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FREU Exam Reduce from 5 hours to 3.5 hours |
Topics moved into ADV |
Estimating the premium asset on retrospectively rated policies and risk transfer testing of reinsurance. |
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Topics moved into FRL |
Government provision of insurance, discrimination in insurance, usage-based insurance, use of insurance credit-scores, captives, tort law, insurance contract law, international law and some topics regarding the regulation of insurance. |
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Topics removed from FREU |
Solvency II standard formula details, implications of Solvency II for the United States, the Canadian actuarial report and Canadian solvency regulation. |
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ADV Exam Increase from 2 hours to 3 hours |
Topics added from RR |
Estimating ultimate claims by layer, specialized ratemaking topics, some reinsurance topics, and funding allocation for self-insurers. |
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Topics added from FREU |
Estimating the premium asset on retrospectively rated policies and risk transfer testing of reinsurance. |
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Topics moved into FRL |
Financial economics approach to ratemaking. |
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FRL Module formerly the FE Module |
Topics added from FREU |
Government provision of insurance, discrimination in insurance, usage-based insurance, use of insurance credit-scores, captives, tort law, insurance contract law, international law, and some topics regarding the regulation of insurance. |
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Topics added from ADV |
Financial economics approach to ratemaking. |
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Topics added |
Price optimization and social inflation. |
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Topics removed from FE |
Introduction to financial economics, utility theory, mean‑variance portfolio theory and modern corporate finance. |
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GIA Module formerly the AST Module |
Topics added from RR |
Premium liabilities, risk classification, monitoring results and catastrophe modeling. |
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Topics removed from AST |
Ordinary least squares, generalized linear model and credibility in the generalized linear model. |
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With respect to the topics that are being removed from the current GI track fellowship requirements:
- Those from the FREU exam are not required for U.S. actuarial work.
- Those from the FE module are not relevant to the work done by most GI actuaries.
- Those from the AST Module are already adequately covered in the following associateship requirements: SRM exam, PA exam and ATPA exam.
In total, the RR, FREU and ADV exams will have their total reading volume reduced by approximately 16 percent. This is consistent with eliminating two hours of exam time from the 12 hours in total for these GI exams. Most of this reduction in reading volume went into the modules. The volume of reading material removed from the current AST and FE modules is approximately equal to the volume of material added from the exams to create the FRL and GIA modules.
Transition Plans for the GI Track
With the restructuring of exams and modules, one may wonder what the transition rules will be because the new requirements will begin with the Spring 2023 administration of exams. Well, it’s simple for the GI track. It’s a one-for-one transition credit for each requirement as follows:
| Successful Completion Prior to Spring 2023[8] | Provides 2023 Credit for |
| RR – 5-Hour WA Exam | RR – 3.5-Hour WA Exam |
| FREU – 5-Hour WA Exam | FREU – 3.5-Hour WA Exam |
| ADV – 2-Hour WA Exam | ADV – 3-Hour WA Exam |
| FE Module | FRL Module |
| AST Module | GIA Module |
The current GI track WA exams, RR, FRE and ADV, total 12 hours of exam time. After the changes in 2023, these exams will total 10 hours. However, depending on when you successfully completed a requirement, your total exam time for these three exams may be greater than or less than 10 hours due to the transition.
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GI track candidates that passed the 4-hour ERM exam in 2022 or prior, will have it included as meeting their fellowship requirements in place of the ADV exam. |
It is also possible that some material covered by these exams and modules may be missed by some candidates depending on when they successfully completed a requirement. For candidates that earn the FSA designation but missed topics due to the transition, it is highly recommended that they include the learning of those topics in their continuing professional development (CPD). This is not an unusual concept. The requirements to attain fellowship have changed many times over the years. However, once one achieves the FSA designation, one does not have to write new exams if there are significant changes to the syllabus. It is up to FSAs to ensure they are up to date through SOA CPD requirements.
Signing the P/C Annual Statement of Actuarial Opinon
NAIC recognition of GI track FSAs being qualified to sign the NAIC P/C SAO involved a mapping of syllabus material in the track to a listing of knowledge statements. All of the knowledge statements needed to be covered to an appropriate level. The GI curriculum committee developed this plan to reduce exam hours in the track under the condition that the syllabus still provides appropriate coverage for all of the NAIC knowledge statements (KS).
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Note: NAIC recognition required the GI track FSA to have passed ADV and the U.S. version of FRE. These requirements still exist. GI track candidates who passed the 4-hour ERM exam in 2022 or prior, and having it included as meeting their fellowship requirements in place of the ADV exam, would not have it count as passing the ADV exam. They would need to pass the ADV exam to have NAIC recognition to sign the P/C SAO. |
An issue that could be raised is that, in transition, candidates may miss some NAIC knowledge statements depending on when they successfully completed a requirement. In instances such as these, GI track FSAs that sign the P/C Annual Statement SAO must document how they learned KS missed through transition. This would normally be done through documented self-directed CPD. This can be explained with a simple example.
Consider an FSA from the GI track who successfully completed all requirements, including the ADV exam, in 2022 and prior except for the FREU exam. They then passed the 3.5-hour FREU exam in 2023 (or later) to earn fellowship. This candidate would get credit for the new 3 hour ADV exam but would be missing parts of two topics from the 5 hour FREU exam that are in the NAIC KS educational standards to sign the P/C SAO but have been moved into the new 3 hour ADV exam—risk transfer testing and estimating the premium asset on retro-rated policies.
| Topic | Article moved from FREU to ADV that reference the topic | Included in SOA’s meeting the educational standard for the following NAIC KS |
| Risk transfer testing | Brehm and Ruhm, Risk Transfer Testing of Reinsurance Contracts[9] (Brehm Ruhm) | C6: Impact on financial statements from contract qualification criteria for prospective or retroactive reinsurance accounting treatment or deposit accounting treatment. C7: Reinsurance risk transfer testing. E7: Reporting on the effect of reinsurance including retroactive reinsurance, financial reinsurance, and potential reinsurance collectability issues. |
| Estimating the premium asset on retro-rated policies | Teng and Perkins, Estimating the Premium Asset on Retrospectively Rated Policies[10] (Teng Perkins) |
B6: Rating Plans (e.g., individual risk rating, class rating, experience rating, retrospective rating, participating policies, judgment rating, schedule rating) and the impact of changes therein. D30: Premium asset for retrospectively rated policies. |
This GI track FSA would need to read the Brehm Ruhm and Teng Perkins articles at a sufficient depth to understand the material and apply the concepts included in them. This should be documented in their CPD log. In doing this, they will meet the educational standard for all of the NAIC knowledge statements.
Moving Forward
The SOA’s changing of the requirements for earning an FSA designation occurs for many reasons. With the business of insurance, and actuarial practice, increasingly making use of predictive analytics and statistical methods, the SOA FSA requirements needed to adapt. This was accomplished through the creation of new exams at the associateship level to address these topics (SRM, PA and ATPA). The reduction of fellowship exams by two hours was done for different reasons. Reducing exam time by two hours for the fellowship exams should reduce travel time. This brings the requirements closer to that of competitor actuarial organizations which should help to attract and retain candidates in the future.
For the GI exams, the reduction of exam hours also provided an opportunity to move certain topics that were difficult to fully test in a written answer exam environment into e-learning modules. An example of this is catastrophe modeling which is moving from the RR Exam to the GIA Module. In an e-learning module, candidates will be able to work on large data sets that are more indicative of real-world problems.
These changes should improve the candidate experience on the road to attain the FSA designation, and it should improve the quality of education received.
So, is this the end of changes to the pathway to attain SOA designations? Doubtful. If there is one constant in the pathway to attaining an actuarial designation, it’s that the pathway will change. The profession constantly faces new challenges and opportunities. The system of accreditation for actuarial education must evolve to keep pace.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the editors, or the respective authors’ employers.
Anthony Cappelletti, FSA, FCIA, FCAS, is a staff fellow for the SOA. He can be contacted at acappelletti@soa.org.