Introduction to the Business Planning: Insurance exam

The Business Planning: Insurance exam is one of the three specialist exams that sit towards the end of the Professional Level and the Advanced Level. As with the other Business Planning exams, Business Planning: Insurance has some features of both the Professional and Advanced levels, such as being a 2.5-hour exam, but no allocation of marks per requirement but rather just by question.

The syllabus covers both life insurance and non-life (general) insurance and related products such as annuities and pensions.

Learning about the management, regulation and reporting of insurance companies will provide you with an insight into how a globally enormous and important industry works, including how to manage the assets side of the business, which must be matched to the nature of the liabilities.

To date, exams have generally followed this pattern:

• Question one (40 marks): Audit and accounting based, recently focusing on preparation of figures for long-term insurance contracts under IFRS 17.
• Question two (30 marks): Often the “asset side” of the business, looking at asset portfolio management, risk capacity and alignment to match the characteristics of the underlying insurance liabilities.
• Question three (30 marks): Often has some element of internal audit or risk management with an insurance-specific scenario, such as assessing whether an insurer’s expected figures for a catastrophe loss are reasonable.

The exam will probably feel somewhat time pressured, but whilst the exam is marked out of a notional 100 marks, but we are told that there are generally 120 marks available. This means that the examiners do not expect even a perfect script to make every possible point. Once you have given the examiner enough evidence for him/her to be convinced that you can apply the skills you have learned, move on to the next question.

It is a good idea to look at the examiners’ comments, which are all available in the “student mark plans” after each examination session on the ICAEW website. These give future exam candidates the chance to learn from what their predecessors did not do so well. Common themes that the examiners flag as areas for improvement are:

• Preparing numbers, but not appearing to understand what they mean. This is especially true in IFRS 17 preparation questions.
• Not using the facts of the scenario, eg, listing the generic advantages of equities or government debts, but not relating those comments to the specific needs of the company in the exam question.
• Over-reacting to apparent breaches of regulation, rather than dealing with them in a realistic and proportionate way.

Whichever exam you choose for the Business Planning option, this exam is likely to take quite a lot of study time. Tax, banking, and insurance are all complicated areas. Time invested is the best way to prepare for success in the examination.