ACAS – Associate of the Casualty Actuarial Society
| Fall Semester 2025/2026 Updated Exam Prep
Guide | 200+ Verified Actuarial Exam Questions
with Correct Answers & Detailed Rationales |
Comprehensive Study Pack for Probability, Risk
Analysis, and Financial Modeling
Question 1
What is the primary purpose of actuarial science?
A) To calculate insurance premiums
B) To evaluate financial risks using mathematics and statistics (Correct Option)
C) To assess investment opportunities
D) To create insurance policies
Rationale: The primary purpose of actuarial science is to evaluate financial risks using
mathematical and statistical methods.
Question 2
What is a common tool used by actuaries to analyze risk?
A) Financial statements
B) Statistical models (Correct Option)
C) Marketing surveys
D) Legal contracts
Rationale: Actuaries use statistical models to analyze and quantify risk in various scenarios.
Question 3
What does "loss reserving" mean in actuarial practice?
A) Reducing premiums
B) Estimating future claims that have occurred but are not yet reported (Correct Option)
C) Allocating funds for marketing
D) Selling insurance policies
Rationale: Loss reserving involves estimating future claims that have occurred but have not yet
been reported, which is crucial for financial stability.
Question 4
Which of the following is a key component of the actuarial control cycle?
A) Premium setting
B) Monitoring and feedback (Correct Option)
C) Marketing strategies
D) Claims processing
Rationale: Monitoring and feedback are essential components of the actuarial control cycle,
allowing for adjustments based on performance.
,Question 5
What is the significance of the "time value of money" in actuarial calculations?
A) It complicates the calculations
B) It recognizes that money received today is worth more than the same amount received in
the future (Correct Option)
C) It only applies to loans
D) It is irrelevant to insurance
Rationale: The time value of money principle is crucial in actuarial calculations, as it affects
how future cash flows are valued.
Question 6
What is "reinsurance"?
A) Insurance for clients
B) Insurance purchased by insurers to mitigate risk (Correct Option)
C) A type of investment
D) A marketing strategy
Rationale: Reinsurance is a strategy used by insurers to transfer some of their risk to other
insurance companies.
Question 7
What does the term "underwriting" refer to?
A) Claims processing
B) The process of evaluating risk and determining premium rates (Correct Option)
C) Selling insurance policies
D) Marketing
Rationale: Underwriting involves evaluating the risk associated with insuring a person or entity
and determining the appropriate premium.
Question 8
What is a loss ratio?
A) Premiums collected divided by expenses
B) Claims paid divided by premiums earned (Correct Option)
C) Total assets divided by liabilities
D) Revenue divided by profit
Rationale: The loss ratio measures the relationship between claims paid and premiums
earned, indicating the profitability of an insurance company.
Question 9
What is the purpose of actuarial models?
A) To create marketing strategies
,B) To predict future financial outcomes based on historical data (Correct Option)
C) To manage claims processing
D) To establish regulatory compliance
Rationale: Actuarial models are designed to predict future financial outcomes by analyzing
historical data and trends.
Question 10
What does "moral hazard" refer to in insurance?
A) The risk of market fluctuations
B) The risk that insured individuals engage in riskier behavior because they have insurance
(Correct Option)
C) The risk of fraud
D) The risk of natural disasters
Rationale: Moral hazard refers to the behavior change that occurs when individuals feel
insulated from risk due to having insurance.
Question 11
What is an "actuarial opinion"?
A) A financial strategy
B) A statement regarding the adequacy of reserves or rates (Correct Option)
C) A marketing tactic
D) An investment recommendation
Rationale: An actuarial opinion assesses the adequacy of reserves or rates and is crucial for
regulatory compliance.
Question 12
What is "catastrophic risk"?
A) Minor losses
B) The potential for significant loss due to rare but severe events (Correct Option)
C) Everyday risks
D) Business-as-usual risks
Rationale: Catastrophic risk involves the potential for substantial loss from infrequent but
severe events, such as natural disasters.
Question 13
What does "premium" refer to in insurance?
A) The total claims paid
B) The amount paid by the policyholder for coverage (Correct Option)
C) The total expenses of the insurer
D) The profit margin of the insurer
Rationale: A premium is the payment made by a policyholder to obtain insurance coverage.
, Question 14
What is "solvency" in the context of insurance companies?
A) The ability to market effectively
B) The ability to meet long-term financial obligations (Correct Option)
C) The amount of claims paid
D) The revenue generated from premiums
Rationale: Solvency refers to an insurance company's ability to meet its long-term financial
obligations, crucial for maintaining operations.
Question 15
What is the purpose of "stress testing" in actuarial practice?
A) To increase profits
B) To assess the impact of extreme conditions on financial stability (Correct Option)
C) To lower premiums
D) To evaluate marketing strategies
Rationale: Stress testing evaluates how extreme scenarios could impact an insurance
company's financial health.
Question 16
What is the "actuarial control cycle"?
A) A method for marketing
B) A framework for managing risk and performance in insurance (Correct Option)
C) A financial reporting standard
D) A claims adjustment process
Rationale: The actuarial control cycle is a framework that guides actuaries in managing risk and
performance throughout the insurance process.
Question 17
What does "data mining" involve in actuarial work?
A) Collecting premiums
B) Analyzing large datasets to identify patterns and trends (Correct Option)
C) Marketing strategies
D) Claims processing
Rationale: Data mining involves analyzing large datasets to extract meaningful patterns and
trends that inform actuarial decisions.
Question 18
What is the significance of "regulatory compliance" for actuaries?
A) It is optional
B) It ensures adherence to legal and industry standards (Correct Option)
| Fall Semester 2025/2026 Updated Exam Prep
Guide | 200+ Verified Actuarial Exam Questions
with Correct Answers & Detailed Rationales |
Comprehensive Study Pack for Probability, Risk
Analysis, and Financial Modeling
Question 1
What is the primary purpose of actuarial science?
A) To calculate insurance premiums
B) To evaluate financial risks using mathematics and statistics (Correct Option)
C) To assess investment opportunities
D) To create insurance policies
Rationale: The primary purpose of actuarial science is to evaluate financial risks using
mathematical and statistical methods.
Question 2
What is a common tool used by actuaries to analyze risk?
A) Financial statements
B) Statistical models (Correct Option)
C) Marketing surveys
D) Legal contracts
Rationale: Actuaries use statistical models to analyze and quantify risk in various scenarios.
Question 3
What does "loss reserving" mean in actuarial practice?
A) Reducing premiums
B) Estimating future claims that have occurred but are not yet reported (Correct Option)
C) Allocating funds for marketing
D) Selling insurance policies
Rationale: Loss reserving involves estimating future claims that have occurred but have not yet
been reported, which is crucial for financial stability.
Question 4
Which of the following is a key component of the actuarial control cycle?
A) Premium setting
B) Monitoring and feedback (Correct Option)
C) Marketing strategies
D) Claims processing
Rationale: Monitoring and feedback are essential components of the actuarial control cycle,
allowing for adjustments based on performance.
,Question 5
What is the significance of the "time value of money" in actuarial calculations?
A) It complicates the calculations
B) It recognizes that money received today is worth more than the same amount received in
the future (Correct Option)
C) It only applies to loans
D) It is irrelevant to insurance
Rationale: The time value of money principle is crucial in actuarial calculations, as it affects
how future cash flows are valued.
Question 6
What is "reinsurance"?
A) Insurance for clients
B) Insurance purchased by insurers to mitigate risk (Correct Option)
C) A type of investment
D) A marketing strategy
Rationale: Reinsurance is a strategy used by insurers to transfer some of their risk to other
insurance companies.
Question 7
What does the term "underwriting" refer to?
A) Claims processing
B) The process of evaluating risk and determining premium rates (Correct Option)
C) Selling insurance policies
D) Marketing
Rationale: Underwriting involves evaluating the risk associated with insuring a person or entity
and determining the appropriate premium.
Question 8
What is a loss ratio?
A) Premiums collected divided by expenses
B) Claims paid divided by premiums earned (Correct Option)
C) Total assets divided by liabilities
D) Revenue divided by profit
Rationale: The loss ratio measures the relationship between claims paid and premiums
earned, indicating the profitability of an insurance company.
Question 9
What is the purpose of actuarial models?
A) To create marketing strategies
,B) To predict future financial outcomes based on historical data (Correct Option)
C) To manage claims processing
D) To establish regulatory compliance
Rationale: Actuarial models are designed to predict future financial outcomes by analyzing
historical data and trends.
Question 10
What does "moral hazard" refer to in insurance?
A) The risk of market fluctuations
B) The risk that insured individuals engage in riskier behavior because they have insurance
(Correct Option)
C) The risk of fraud
D) The risk of natural disasters
Rationale: Moral hazard refers to the behavior change that occurs when individuals feel
insulated from risk due to having insurance.
Question 11
What is an "actuarial opinion"?
A) A financial strategy
B) A statement regarding the adequacy of reserves or rates (Correct Option)
C) A marketing tactic
D) An investment recommendation
Rationale: An actuarial opinion assesses the adequacy of reserves or rates and is crucial for
regulatory compliance.
Question 12
What is "catastrophic risk"?
A) Minor losses
B) The potential for significant loss due to rare but severe events (Correct Option)
C) Everyday risks
D) Business-as-usual risks
Rationale: Catastrophic risk involves the potential for substantial loss from infrequent but
severe events, such as natural disasters.
Question 13
What does "premium" refer to in insurance?
A) The total claims paid
B) The amount paid by the policyholder for coverage (Correct Option)
C) The total expenses of the insurer
D) The profit margin of the insurer
Rationale: A premium is the payment made by a policyholder to obtain insurance coverage.
, Question 14
What is "solvency" in the context of insurance companies?
A) The ability to market effectively
B) The ability to meet long-term financial obligations (Correct Option)
C) The amount of claims paid
D) The revenue generated from premiums
Rationale: Solvency refers to an insurance company's ability to meet its long-term financial
obligations, crucial for maintaining operations.
Question 15
What is the purpose of "stress testing" in actuarial practice?
A) To increase profits
B) To assess the impact of extreme conditions on financial stability (Correct Option)
C) To lower premiums
D) To evaluate marketing strategies
Rationale: Stress testing evaluates how extreme scenarios could impact an insurance
company's financial health.
Question 16
What is the "actuarial control cycle"?
A) A method for marketing
B) A framework for managing risk and performance in insurance (Correct Option)
C) A financial reporting standard
D) A claims adjustment process
Rationale: The actuarial control cycle is a framework that guides actuaries in managing risk and
performance throughout the insurance process.
Question 17
What does "data mining" involve in actuarial work?
A) Collecting premiums
B) Analyzing large datasets to identify patterns and trends (Correct Option)
C) Marketing strategies
D) Claims processing
Rationale: Data mining involves analyzing large datasets to extract meaningful patterns and
trends that inform actuarial decisions.
Question 18
What is the significance of "regulatory compliance" for actuaries?
A) It is optional
B) It ensures adherence to legal and industry standards (Correct Option)
