CT5 CONTINGENCIES deals with the mathematical techniques which can be used to model and value the cash flows which are dependent on death, survival or other uncertain risks. It can be considered as an extension of the subject CT1-Financial Mathematics. Probabilities of the payments happening are accounted along with the amount of payments. This technique is used to further develop the price of life insurance products.
Here is a brief introduction of what you will study in CT5:
- Mathematics of life Insurance Contracts with the use of actuarial symbols. Different types of assurance and annuity contracts and calculating the probabilities associated with them.
- How the life tables are constructed and used in calculation of valuing the various insurance contracts?
- The general pattern of human mortality and various methods of selection on the basis of different factors which contribute to the variation in mortality like- age, sex, education, occupation etc.
- The calculation of premiums and reserves using the principle of equivalence having fixed/variable benefits for with or without profit policies
- An in-depth explanation of why companies hold reserves?
- The calculations of assurance and annuity contracts involving two lives i.e. Joint life policies.
- The insurance contracts having benefits contingent upon the various transition events like: Healthy, Sick and Dead.
- The structure of pension contribution schemes and how the pension benefits can be valued.
- The technique of profit testing and show how profit testing can be used for the purpose of calculating premiums, setting reserves and various other applications.
Some common questions that students have regarding CT5 are covered below:
Q. What is the update to CT5 as per 2019 Curriculum?
Ans. Under the 2019 Curriculum, CT5 has been combined with CT1, resulting in a new subject called CM1 (Core Mathematics 1). This exam will consist of two parts. One will be a 3 hours 15 minutes written exam, and the other will be 1 hour 45 minutes practical exam using MS Excel.
Q. When should I give CT5?
Ans. For the students who have already cleared CT1, it is mandatory to clear CT5 before the implementation of 2019 curriculum in order to get exemption from the subject CM1 and remember, September 2018 attempt is the last chance to pass it.
And for those students who have not cleared CT1 and CT5 yet, you can either sit for both the exams in Sept. 2018 exam diet or appear for the combined subject CM1 under new curriculum. It is advisable to sit for the subject CM1 to save time and money.
Q. How much time do I need to complete the syllabus?
Ans. The ideal time required to prepare for CT5 is 150-200 hours, as suggested by the institute. However, it depends on the individual and how much focused and dedicated you are towards the subject.
Q. What is the average pass percentage of IAI and IFoA?
Ans. The average pass percentage of the last five exam diets of IAI (April 2016 – April 2018) is 22.58% and that of IFoA (September 2015 – September 2017) is 52.92%.
Q. What is the passing mark of IAI and IFoA?
Ans. Based on the average of last five exam diets, passing marks for CT5 is 60 (IFoA). However, IAI does not disclose its pass marks.
Q. Which topics should be focused on for scoring good marks?
Ans. There are some topics like calculating net/gross premiums and reserves with fixed/variable benefits, competing risks, profit testing which are quite scoring in the CT5 exam. However, all chapters are equally important and you should not skip anything, and should be familiar with all the concepts given in the subject. The first four chapters form the base for the subject. Do not lose patience if you have to spend some time on them.
Q. Will it be helpful to take coaching for CT5?
Ans. The answer to this question solely depends on the student. I did not take coaching for CT5. I can say, from my experience that it can be done by self-studying, if you are ready to put in the sufficient time and effort to understand the concepts followed by the proper revision of the subject.
Q. Which subjects would require the knowledge of CT5?
Ans. Subjects ST1 (Health and care), ST2 (Life Insurance) and ST4 (Pension and other employee benefits) use the principles introduced in CT5.
Q. Knowledge of which other CT papers should I have before attempting CT5?
Ans. CT5 requires the understanding of basic concepts given in CT1 and CT3. Some of the CT4 concepts are also required, however a student can appear for CT5 before CT4. It would be advised to clear CT1 and CT3 before starting preparations for CT5 exam.
Q. Is there any additional material which needs to be studied?
Ans. In my opinion, you do not need any additional material to clear CT5. The study material provided by the institute contains all the insights and concepts that you would need to fully understand and clear the subject.
Q. Can you give some tips on clearing CT5?
Ans. The first and most important step in clearing any actuarial paper is having a positive attitude towards the subject and your ability to clear it. Then comes the preparation part. Some tips from my experience are:
- Start with the core reading provided by the institute. Try to understand the concepts by reading it again and again.
- Make your own notes. It was very helpful for me to make my own notes in easier words. It saves time and is helpful for quick revisions.
- Formula list: There are a lot of formulae in CT5. It will be helpful for you to make a list of all the formulae needed for the subject.
- Revision Notes: (my favorite!) I must say, revision notes are really good for practice purpose. Let me tell you what they are:
- Revision notes are past ten years IFoA question papers with detailed solutions divided into small booklets, sorted chapter-wise. Although the past papers are of IFoA, you can use them for preparation even if you are appearing from IAI.
- The Combined Material Pack (CMP) provides many questions such as Q&A Banks, X-Series assignments and Mock Exam along with the material. Do solve them if you have time after doing your revision notes.
- If you are appearing from IAI, make sure that you solve at least past 5 years’ papers of IAI in strict exam conditions.
Apart from these, your own effort is what matters most. So work hard and all the best!
To know more on how to prepare for actuarial science exams, click here.