Actuarial Notes

Exam CP-312

CP 312 – Model Development and Governance is an exam of the Society of Actuaries' Fellowship (FSA) pathway. Its syllabus covers the Nov 2026/Mar 2027 sittings.

Learning Objectives

Cash Flow Models for Long-Term Insurance Business (35–50%) The candidate will understand, develop, apply, and evaluate cash flow models for various types of long-term insurance business. The candidate will demonstrate an understanding of underlying modeling methodologies: their strengths, limitations, and applications.

The Candidate will be able to describe, develop, apply, and evaluate:

  1. Models and their outputs for insurance products including those with complex components such as:
  2. Nested models and their outputs
  3. Model validation techniques
  4. Model efficiency techniques

Readings:

  • Video: Model Risk, SOA, 2024 (1a)
    • Model Risk Companion Notes
  • CP312-100-25: Chapter 3 of Modelling in Life Insurance - A Management Perspective, Laurent, Jean-Paul, Norberg, Ragnar, Planchet, Frederic, 2016 (1a)
  • Long-Term Actuarial Models Part II, Cardinal, Timothy, Cardinalis 1 LLC, 2024 (1a)
    • Ch. 1: Introduction to Modeling (excluding search online exercises in section 1.5)
  • CP312-101-25: Stochastic Modeling, Theory and Reality from an Actuarial Perspective, sections I.A, I.B-1.B.3.a, I.B.4, and III (1a, 1d)
  • Long-Term Actuarial Models Part II, Cardinal, Timothy, Cardinalis 1 LLC, 2024 (1a, 1b)
    • Ch. 3: Principle-Based Projections and Nested Methods: (Sections 3.1 to 3.2), including workbooks
  • Predictive Analytics and Machine Learning - Practical Applications for Actuarial Modeling (Nested Stochastic), SOA Research Institute, May 2023, Sections 1.2-1.3, 3-6 (1b-1d)
  • Considerations Regarding Dynamic Lapses in Actuarial Modeling, American Academy of Actuaries, Dec 2023 (1a, 1b)
  • Long-Term Actuarial Models Part II, Cardinal, Timothy, Cardinalis 1 LLC, 2024 (1a, 1b)
    • Ch. 6: Secondary Guarantee Universal Life, including workbooks
    • Ch. 9 Fixed and Fixed Indexed Annuities, including workbooks
    • Ch. 11: Long Term Health Products (Sections 11.1 - 11.5), including IDI workbooks
  • CP312-102-25: Heavy Models, Light Models and Proxy Models, Chapters 1-5 (1d)
  • Metamodeling for Variable Annuities, Valdez, Emiliano and Gan, Guojun (1d)
    • Chapters 1-3, 6

Other types of Models for Financial Business (30–45%) The candidate will understand, apply, and evaluate other types of models for various types of financial business. The candidate will demonstrate an understanding of underlying methodologies: their strengths, limitations, and applications.

  1. Describe, apply, and assess types of models such as the following and evaluate the appropriateness of their usage:
  2. Describe, apply, and evaluate model validation techniques
  3. Describe, apply, and evaluate model efficiency techniques

Readings:

  • Video: Model Risk, SOA, 2024 (2a)
    • Model Risk Companion Notes
  • Economic Scenario Generators: A Practical Guide, SOA, Jul 2016, Ch. 1, 2, 4.1-4.3, 5, 6, 7.1-7.3, 8 (2a. 2b)
  • Economic Scenario Generators – three-part series, SOA:
    • Part I –Motivation for Stochastic Modeling, The Modeling Platform, Nov 2019 (2a)
    • Part II – Understanding Economic Scenario Generators, The Modeling Platform, Aug 2020 (2a)
    • Part III – In-depth ESG Case Study – Academy Interest Rate Generator, The Modeling Platform, Jul 2021 (2a)
  • CP312-112-26: Here it “GOES” Again: Reviewing the NAIC’s Second Industry Field Test of the Generator of Economic Scenarios (2a)
  • CP312-103-25: Chapter 8 of Quantitative Enterprise Risk Management, Hardy, Mary and Saunders, David, 2022 (8.1-8.6) (2a)
  • CP312-104-25: Chapter 7 of Derivatives Theory and Practice, Witzany, 2020 (2a)
  • CP312-105-25: Chapter 9 of Asset/Liability Management of Financial Institutions, Tilman, 2003 (2a)
  • CP312-101-25: Stochastic Modeling, Theory and Reality from an Actuarial Perspective, sections I.A, I.B-B.2, I.B.3.a, II.B-B.1.d (2a, 2c)
  • CP312-106-25: Catastrophe Modelling: Guidance for Non-Catastrophe Modelers (2a)
  • CP312-113-26: Importance of Climate-Related Risks for Actuaries (2a)
  • A Primer on Generative AI for Actuaries, Feb 2024 (Sections 1- 5) (2a, 2b, 2c)
  • Predictive Analytics and Machine Learning - Practical Applications for Actuarial Modeling (Nested Stochastic), SOA Research Institute, May 2023, Sections 3, 5 & 6 (Sections 1.2-1.3 background only) (2a, 2c)
  • CP312-114-26: Rise of the Machines: Application of Machine Learning to Mortgage Pre-Payment Modeling (2a, 2b)
  • CP312-107-25: A Financially Justifiable and Practically Implementable Approach to Coherent Stress Testing (2b)
  • CP312-109-25: Chapter 7 (Sec. 7.2 only) of Modelling in Life Insurance - A Management Perspective, Laurent, Norbert, Planchet editors (2b)
  • CP312-102-25: Heavy Models, Light Models and Proxy Models, Ch. 1-5 (2c)
  • Metamodeling for Variable Annuities, Valdez, Emiliano and Gan, Guojun (2c)
    • Chapters 1-3, 6

Model Governance (15–25%) The candidate will understand and be able to apply appropriate model governance to assess and address issues common to the development and management of models.

  1. Describe and apply model governance best practices such as:
    • Determining fit for purpose
    • Model design and development
    • Model risk management
    • Model validation
    • Model maintenance and change management
    • Model and model governance documentation and disclosures
  2. Describe, compare and evaluate organizational structures for model governance, including controls, roles, and responsibilities

Readings:

  • ASOP 56: Modeling, Dec 2019, pp. 1-9 (3a)
  • CIA Educational Note: Use of Models, Jan 2017 (3a, 3b)
  • CP312-115-26: Guideline E23 – Model Risk Management (3a, 3b)
  • Model Validation for Insurance Enterprise Risk and Capital Models, CAS/CIA/SOA, Apr 2014 (excluding Appendices) (3a)
  • Adding Value with Model Validation, The Modeling Platform, Nov 2017 (3a, 3b)
  • CP312-111-25: Machine Decisions: Governance of AI and Big Data Analytics (3a)
  • The Importance of Centralization of Actuarial Modeling Functions, Part 1: Focus on Modularization and Reuse, The Modeling Platform, Nov 2019 (3a, 3b)
  • The Importance of Centralization of Actuarial Modeling Functions, Part 2: DevOps – The Path to Actuarial Modernization and Consolidation, The Modeling Platform, Apr 2020, pp. 6-9 (3a, 3b)

Source Material

Source Material

  • Video: Model Risk, SOA, 2024
    • Model Risk Companion Notes (1a)
    • Model Risk Companion Notes (2a)
  • CP312-100-25: Chapter 3 of Modelling in Life Insurance - A Management Perspective, Laurent, Jean-Paul, Norberg, Ragnar, Planchet, Frederic, 2016
    • Outcomes 1a
  • Long-Term Actuarial Models Part II, Cardinal, Timothy, Cardinalis 1 LLC, 2024
    • Ch. 1: Introduction to Modeling (excluding search online exercises in section 1.5) (1a)
    • Ch. 3: Principle-Based Projections and Nested Methods: (Sections 3.1 to 3.2), including workbooks (1a, 1b)
    • Ch. 6: Secondary Guarantee Universal Life, including workbooks (1a, 1b)
    • Ch. 9 Fixed and Fixed Indexed Annuities, including workbooks (1a, 1b)
    • Ch. 11: Long Term Health Products (Sections 11.1 - 11.5), including IDI workbooks (1a, 1b)
  • CP312-101-25: Stochastic Modeling, Theory and Reality from an Actuarial Perspective, sections I.A, I.B-1.B.3.a, I.B.4, and III
    • Outcomes 1a, 1d
    • Outcomes 2a, 2c
  • Predictive Analytics and Machine Learning - Practical Applications for Actuarial Modeling (Nested Stochastic), SOA Research Institute, May 2023, Sections 1.2-1.3, 3-6
    • Outcomes 1b-1d
    • Outcomes 2a, 2c
  • Considerations Regarding Dynamic Lapses in Actuarial Modeling, American Academy of Actuaries, Dec 2023
    • Outcomes 1a, 1b
  • CP312-102-25: Heavy Models, Light Models and Proxy Models, Chapters 1-5
    • Outcomes 1d
    • Outcomes 2c
  • Metamodeling for Variable Annuities, Valdez, Emiliano and Gan, Guojun
    • Chapters 1-3, 6 (1d)
    • Chapters 1-3, 6 (2c)
  • Economic Scenario Generators: A Practical Guide, SOA, Jul 2016, Ch. 1, 2, 4.1-4.3, 5, 6, 7.1-7.3, 8
    • Outcomes 2a. 2b
  • Economic Scenario Generators – three-part series, SOA:
    • Part I –Motivation for Stochastic Modeling, The Modeling Platform, Nov 2019 (2a)
    • Part II – Understanding Economic Scenario Generators, The Modeling Platform, Aug 2020 (2a)
    • Part III – In-depth ESG Case Study – Academy Interest Rate Generator, The Modeling Platform, Jul 2021 (2a)
  • CP312-112-26: Here it “GOES” Again: Reviewing the NAIC’s Second Industry Field Test of the Generator of Economic Scenarios
    • Outcomes 2a
  • CP312-103-25: Chapter 8 of Quantitative Enterprise Risk Management, Hardy, Mary and Saunders, David, 2022 (8.1-8.6)
    • Outcomes 2a
  • CP312-104-25: Chapter 7 of Derivatives Theory and Practice, Witzany, 2020
    • Outcomes 2a
  • CP312-105-25: Chapter 9 of Asset/Liability Management of Financial Institutions, Tilman, 2003
    • Outcomes 2a
  • CP312-106-25: Catastrophe Modelling: Guidance for Non-Catastrophe Modelers
    • Outcomes 2a
  • CP312-113-26: Importance of Climate-Related Risks for Actuaries
    • Outcomes 2a
  • A Primer on Generative AI for Actuaries, Feb 2024 (Sections 1- 5)
    • Outcomes 2a, 2b, 2c
  • CP312-114-26: Rise of the Machines: Application of Machine Learning to Mortgage Pre-Payment Modeling
    • Outcomes 2a, 2b
  • CP312-107-25: A Financially Justifiable and Practically Implementable Approach to Coherent Stress Testing
    • Outcomes 2b
  • CP312-109-25: Chapter 7 (Sec. 7.2 only) of Modelling in Life Insurance - A Management Perspective, Laurent, Norbert, Planchet editors
    • Outcomes 2b
  • ASOP 56: Modeling, Dec 2019, pp. 1-9
    • Outcomes 3a
  • CIA Educational Note: Use of Models, Jan 2017
    • Outcomes 3a, 3b
  • CP312-115-26: Guideline E23 – Model Risk Management
    • Outcomes 3a, 3b
  • Model Validation for Insurance Enterprise Risk and Capital Models, CAS/CIA/SOA, Apr 2014 (excluding Appendices)
    • Outcomes 3a
  • Adding Value with Model Validation, The Modeling Platform, Nov 2017
    • Outcomes 3a, 3b
  • CP312-111-25: Machine Decisions: Governance of AI and Big Data Analytics
    • Outcomes 3a
  • The Importance of Centralization of Actuarial Modeling Functions, Part 1: Focus on Modularization and Reuse, The Modeling Platform, Nov 2019
    • Outcomes 3a, 3b
  • The Importance of Centralization of Actuarial Modeling Functions, Part 2: DevOps – The Path to Actuarial Modernization and Consolidation, The Modeling Platform, Apr 2020, pp. 6-9
    • Outcomes 3a, 3b