Exams IRL: Exam 6
When studying for exams, do you ever wonder when and how you’ll use any of the concepts you’re learning? Then look no further! This article is one in a series about “Exams IRL.” A previous version of this article by Rehan Siddique, FCAS, can be found in Future Fellows, December 2020.1 This article will offer an updated perspective on how we as actuaries use Exam 6 material in the real world. We’ll focus on Exam 6-U.S. but also touch upon the Canadian and International versions of Exam 6 as well. Let’s start by going through each exam section of the Exam 6-US Content Outline.2
A. United States Laws and Regulations
This section of the syllabus touches upon “regulations required by various governmental agencies who oversee the work of insurers.” For example, exam takers will learn how regulations affect ratemaking and risk classification. Actuaries who work in ratemaking will submit rate filings to state insurance regulators and may have to respond to questions from regulators called “objections,” so it’s important to understand the rationale behind these questions. This section of the Content Outline also focuses on insurer solvency and the various ratios used to assess the health of an insurer.
B. Government Programs
While many actuaries will work for insurance companies, government programs are an important part of our work as well. Even actuaries who work for an insurer may at some point in their careers work with government programs as well. For example, a reserving actuary who works on the crop line of business will see that certain policies are part of the government subsidized multi-peril crop insurance (MPCI) program rather than private crop insurance.3 MPCI is able to offer coverage for more perils and has the backing of the government to help private insurers offer a more affordable price to farmers, and learning more about this program will help you better understand the line of business you are reserving for.
C. Financial Reporting, Taxation and Professional Responsibilities of the Actuary
In this section of the syllabus, actuaries will become more familiar with the various financial statements an insurer produces. A very practical part of the syllabus focuses on the creation of the actuarial opinion summary. Exam takers will learn about the components of the summary, such as a range of adequate reserves. While an exam taker is not yet able to be an appointed actuary and write such statements themselves, their work on a reserving team will undoubtedly flow into such a statement and it is helpful to see how day-to-day work can roll up to a higher level.
D. Reinsurance Accounting Principals
Here, you’ll learn what allows a transaction to be considered reinsurance and how it can impact a company’s financials. If you are working on reinsurance transactions, this section of the syllabus can help you understand what is needed for such a transaction to qualify as reinsurance. You’ll also learn about the different types of reinsurance and have a better understanding of why a company may enter into a fronting agreement, for example, to be able to offer insurance where they normally couldn’t. For more real-world examples, see the study note by Cedar and Thompson.4
Exam 6 – Canada
Now that we’ve talked about the U.S. version of Exam 6, let’s take a look at the Canadian version. There are three sections of the exam syllabus for Exam 6 – Canada. They are Regulation of Insurance and Canadian Insurance Law, Government and Industry Insurance Programs, and Canadian Financial Reporting and Solvency. You’ll see that overall, there’s quite a bit of overlap conceptually with Exam 6-U.S., but of course with a more Canada-specific focus. With this exam, you’ll be able to learn more about what is required for Canada-specific regulations, how the Canadian government insurance programs interact with the private sector and the duties of the appointed actuary in Canada, just as a few examples.5
Exam 6 – International
This exam focuses on the insurance markets in China, Hong Kong, Malaysia and Singapore. There are five sections: Regulation of Insurance, Solvency, Financial Reporting, International Reinsurance, and Professional Responsibilities of the Actuary in Financial Reporting.6 You won’t find any NAIC papers in the Content Outline for the international version of Exam 6, but you will find papers on IFRS reporting and many papers from the International Actuarial Association. This exam will also focus on the types of insurance regulations used in these countries. You’ll also find more information on insurance that is more commonly used outside the U.S., such as microinsurance, which is most commonly used in Asia, according to one of the text references on the syllabus.7
Regardless of which version of Exam 6 you’re taking, you’ll encounter many topics that you’ll use (now or in the future) in your career as an actuary. Studying can sometimes be an arduous experience, but hopefully after reading this article you have a better understanding of how you might use some of what you study!
[1] https://www.casact.org/newsletter/article/exams-real-life-exam-6.
[2] https://www.casact.org/sites/default/files/2023-12/Exam_6U_CO_2024_F_v01_2023_12_19.pdf.
[3] https://content.naic.org/insurance-topics/crop-insurance.
[5] https://www.casact.org/sites/default/files/2024-07/Exam_6C_Content_Outline.pdf.
[6] https://www.casact.org/sites/default/files/2024-07/Exam_6I_content_outline.pdf.
[7] https://www.casact.org/sites/default/files/2023-05/6I_Dror_Piesse_What_is_Microinsurance.pdf.
