Actuarial Notes

Exam CP-321

CP 321 – Disability, Long-Term Care, and Long-Duration Health Contracts is an exam of the Society of Actuaries' Fellowship (FSA) pathway. Its syllabus covers the Nov 2026/Jul 2027 sittings.

Learning Objectives

Plan and Product Provisions (5–15%) The candidate will understand how to describe benefits typically offered under long duration contracts (disability income, long term care, critical illness, Medicare Supplement).

  1. Describe typical organizations offering these contracts and their motivation for offering each type
  2. Describe each type of contract listed above
  3. Evaluate the potential moral hazards and financial and legal risks associated with each contract
  4. Describe Social Security disability income benefits in the United States

Readings:

  • Individual Health Insurance, Leida, Hans, 3rd Edition, 2026 (1b, 1c)
    • Ch. 2: The Products (Sections 2.7-2.9)
  • Group Insurance, Skwire, Daniel D., 8th Edition, 2021
    • Ch. 9: Government Health Plans in the United States, pp. 149 - 153 (1d)
    • Ch. 12: Group Disability Income Benefits (1a-1c)
  • Insuring Long-Term Care, Eaton, Robert, et. al., 2nd Edition, 2024 (1b, 1c)
    • Ch. 2: History of Long-Term Care Products
    • Ch. 4: Hybrid Life and Long-Term Care Products
  • Critical Illness Turns 40!, Health Watch, Sep 2023 (1a-1c)

Manual Rates (25–35%) The candidate will understand how to calculate rates for each of the contracts described in Learning Objective 1.

  1. Identify and evaluate sources of data needed for pricing, including the quality, appropriateness, and limitations of each data source
  2. Calculate and recommend assumptions
  3. Calculate and recommend a manual rate (includes base rate development and applying a rating manual) and describe the role of data credibility used to calculate the rate
  4. Identify critical metrics to evaluate actual vs. expected results
  5. Recommend strategies for properly modelling, pricing, underwriting, and funding case-specific risks
  6. Describe the purpose and objectives of Guaranty Associations and the multi-state framework for long term care rate increases
  7. Apply actuarial best practices in evaluating and projecting cash flows (premiums, claims, investment income, expenses, commissions), liabilities, and required capital

Readings:

  • Group Insurance, Skwire, Daniel D., 8th Edition, 2021
    • Ch. 25: Estimating Disability Claim Costs (2a-2d)
    • Ch. 29: Group Insurance Underwriting, pp. 509 - 510 (2e)
  • CP321-100-25: Issues to Consider in Self-Funding Long-Term Disability Insurance (2e)
  • CP321-102-25: Short Term Disability Example (2e)
  • Issues In Applying Credibility to Group Long-Term Disability Insurance, 2013, pp. 5-15 (2e)
  • Group Life Waiver Study Based on 2009-2015 Canadian Group LTD Termination Experience Report, CIA Study, Jan 2020, pp. 4-25, Appendix G (background only) (2d)
  • Best Estimate Assumption for Expenses, CIA Educational Note, Nov 2006, pp. 19-39 (2c)
  • Insuring Long-Term Care, Eaton, Robert, et. al., 2nd Edition, 2024 (2b-2d)
    • Ch. 9: Long-Term Care Insurance Experience Monitoring
    • Ch. 10: Long-Term Care Insurance Premium Rate Increases
  • ASOP 18: Long-Term Care (excluding Appendices) (2g)
  • CP321-103-26: Long-Term Care Insurance Multistate Rate Review Framework, NAIC, Dec 2025, Sections V-VI (2f)
  • CP321-101-25: Pricing Medicare Supplement Benefits, 2020, sections II, IV, V & Appendix (2a-2d)
  • Individual Health Insurance, Leida, Hans, 3rd Edition, 2026 (2e)
    • Ch. 4: Managing Antiselection (Sections 4.1-4.5)
  • ASOP 23: Data Quality (excluding Appendices) (2a, 2g)
  • ASOP 41: Actuarial Communications (excluding Appendices) (2g)

Reserving (15–25%) The candidate will understand how to apply valuation principles for long-duration contracts.

  1. Describe and calculate types of non-claim reserves held for long duration health contracts: policy reserves, unearned premium reserves, and premium deficiency reserves
  2. Describe and calculate types of claim reserves held for long duration health contracts: PVANYD (present value of amounts not yet due), ICOS (in course of settlement), and IBNR (incurred but not reported)
  3. Explain the limitations and biases of traditional valuation methods
  4. Calculate appropriate claim reserves given data
  5. Describe, calculate, and evaluate the impact of environmental factors on reserve calculations (trend, seasonality, claim processing changes, etc.)
  6. Evaluate data resources and appropriateness for calculating reserves
  7. Apply appliable best practices related to reserving

Readings:

  • Group Insurance, Skwire, Daniel D., 8th Edition, 2021 (3a-3e, 3g)
    • Ch. 40: Claim Reserves for Long-Term Benefits
  • Individual Health Insurance, Leida, Hans, 3rd Edition, 2026 (3a-3g)
    • Ch. 6: Reserves and Liabilities
  • Insuring Long-Term Care, Eaton, Robert, et. al., 2nd Edition, 2024 (3a, 3b)
    • Ch. 8: Long-Term Care Insurance Valuation
  • CP321-104-25: Practices for Preparing Health Contract Reserves (3a, 3g)
  • CP321-105-25: Supplemental Comments (March 2022) for CP321-104-25 (3a, 3g)

Insurer Financial Statements (5–15%) The candidate will understand how to prepare and interpret insurance company financial statements for long duration contracts.

  1. Compare valuation standards under IFRS 17, US GAAP, and Statutory Accounting
  2. Prepare financial statements in accordance with Generally Accepted Accounting Principles (GAAP) and IFRS 17
  3. Interpret the results of both statutory and GAAP statements from the viewpoint of stakeholders, including regulators, senior management, and investors
  4. Project financial outcomes and recommend a strategy
  5. Apply applicable best practices

Readings:

  • CP321-107-25: Health Insurance Accounting Basics for Actuaries, Sections 4-7 (4a-4d)
  • CP321-106-25: Excerpt from AAA Application of ASU 2018-12 to the Accounting for Long-Duration Contracts under U.S. GAAP (Section IV only) (4b, 4e)
  • IFRS 17 Insurance Contract Examples (4b, 4d)

Asset Adequacy (0–10%) The candidate will understand how to evaluate asset matching and asset adequacy standards for long duration contracts.

  1. Understand the principles of Asset-Liability Management (ALM)
  2. Evaluate techniques for addressing mismatched assets and liabilities
  3. Describe asset adequacy approaches commonly applied to long-duration health contracts
  4. Describe cash flow projections and interactions between asset and liability cash flows

Readings:

  • CP321-108-25: ALM for Life, Annuities, and Pensions, Sections 2, 5 & 6 (5a, 5b)
  • CP321-109-25: Chapter 3 of Modelling in Life Insurance – A Management Perspective, 2016 (5d)
  • ASOP 22: Statements of Actuarial Opinion Based on Asset Adequacy Analysis for Life Insurance, Annuity, or Health Insurance Reserves and Other Liabilities (excluding Appendices) (5c)

Retiree Group Benefits (20–30%) The candidate will understand how to design and perform valuations of retiree group benefits.

  1. Describe why employers offer retiree group benefits
  2. Determine appropriate demographic, economic, and benefit assumptions and apply to a retiree health valuation
  3. Determine employer liabilities, service cost, and expense for post-retirement and post-employment benefits and prepare disclosure information for financial reporting purposes
  4. Describe current issues faced by governments, employers, and employees related to post-retirement and post-employment benefits
  5. Apply actuarial best practices to post-retirement and post-employment benefit plans
  6. Propose ways to manage the range of risks faced by plan participants and retirees through retiree health and life plan designs
  7. Advise a plan sponsor regarding the choice of design elements for their retiree health program given situational context

Readings:

  • CP321-110-25: Chapter 24 of Morneau Shepell Handbook of Canadian Pension & Benefit Plans, 17th Edition, 2020 (6a, 6b, 6d, 6f, 6g)
  • CP321-113-25: IAS 19: A Primer on Non-Pension Benefit Accounting for Valuation Actuaries (6a-6g)
  • CP321-111-25: IAS19 (6b, 6c)
  • Health Care Trend Rate, CIA Educational Note, May 2012, pp. 4-17 only (6b, 6e, 6g)
  • Setting the Accounting Discount Rate Assumption for Pension and Post-Employment Benefit Plans, CIA Educational Note, Dec 2020 (6b, 6e, 6g)
  • Practice-Specific Standards for Non-Pension Employee Future Benefit Plans (Effective February 1, 2024), CIA Standards of Practice, Dec 2023 (6b, 6c, 6e, 6f)
  • CP321-114-25: New Approaches Needed to Save Retiree Benefits (6d-6g)
  • CP321-115-25: Mercer Quick Poll: 2022 Post-Retirement Benefit Trends - Supporting a Challenging Labour Environment (6d-6g)
  • CP321-116-25: Retiree Health Benefits: Going, Going, Nearly Gone? (6d-6g)

Source Material

Source Material

  • Individual Health Insurance, Leida, Hans, 3rd Edition, 2026
    • Ch. 2: The Products (Sections 2.7-2.9) (1b, 1c)
    • Ch. 4: Managing Antiselection (Sections 4.1-4.5) (2e)
    • Ch. 6: Reserves and Liabilities (3a-3g)
  • Group Insurance, Skwire, Daniel D., 8th Edition, 2021
    • Ch. 9: Government Health Plans in the United States, pp. 149 - 153 (1d)
    • Ch. 12: Group Disability Income Benefits (1a-1c)
    • Ch. 25: Estimating Disability Claim Costs (2a-2d)
    • Ch. 29: Group Insurance Underwriting, pp. 509 - 510 (2e)
    • Ch. 40: Claim Reserves for Long-Term Benefits (3a-3e, 3g)
  • Insuring Long-Term Care, Eaton, Robert, et. al., 2nd Edition, 2024
    • Ch. 2: History of Long-Term Care Products (1b, 1c)
    • Ch. 4: Hybrid Life and Long-Term Care Products (1b, 1c)
    • Ch. 9: Long-Term Care Insurance Experience Monitoring (2b-2d)
    • Ch. 10: Long-Term Care Insurance Premium Rate Increases (2b-2d)
    • Ch. 8: Long-Term Care Insurance Valuation (3a, 3b)
  • Critical Illness Turns 40!, Health Watch, Sep 2023
    • Outcomes 1a-1c
  • CP321-100-25: Issues to Consider in Self-Funding Long-Term Disability Insurance
    • Outcomes 2e
  • CP321-102-25: Short Term Disability Example
    • Outcomes 2e
  • Issues In Applying Credibility to Group Long-Term Disability Insurance, 2013, pp. 5-15
    • Outcomes 2e
  • Group Life Waiver Study Based on 2009-2015 Canadian Group LTD Termination Experience Report, CIA Study, Jan 2020, pp. 4-25, Appendix G (background only)
    • Outcomes 2d
  • Best Estimate Assumption for Expenses, CIA Educational Note, Nov 2006, pp. 19-39
    • Outcomes 2c
  • ASOP 18: Long-Term Care (excluding Appendices)
    • Outcomes 2g
  • CP321-103-26: Long-Term Care Insurance Multistate Rate Review Framework, NAIC, Dec 2025, Sections V-VI
    • Outcomes 2f
  • CP321-101-25: Pricing Medicare Supplement Benefits, 2020, sections II, IV, V & Appendix
    • Outcomes 2a-2d
  • ASOP 23: Data Quality (excluding Appendices)
    • Outcomes 2a, 2g
  • ASOP 41: Actuarial Communications (excluding Appendices)
    • Outcomes 2g
  • CP321-104-25: Practices for Preparing Health Contract Reserves
    • Outcomes 3a, 3g
  • CP321-105-25: Supplemental Comments (March 2022) for CP321-104-25
    • Outcomes 3a, 3g
  • CP321-107-25: Health Insurance Accounting Basics for Actuaries, Sections 4-7
    • Outcomes 4a-4d
  • CP321-106-25: Excerpt from AAA Application of ASU 2018-12 to the Accounting for Long-Duration Contracts under U.S. GAAP (Section IV only)
    • Outcomes 4b, 4e
  • IFRS 17 Insurance Contract Examples
    • Outcomes 4b, 4d
  • CP321-108-25: ALM for Life, Annuities, and Pensions, Sections 2, 5 & 6
    • Outcomes 5a, 5b
  • CP321-109-25: Chapter 3 of Modelling in Life Insurance – A Management Perspective, 2016
    • Outcomes 5d
  • ASOP 22: Statements of Actuarial Opinion Based on Asset Adequacy Analysis for Life Insurance, Annuity, or Health Insurance Reserves and Other Liabilities (excluding Appendices)
    • Outcomes 5c
  • CP321-110-25: Chapter 24 of Morneau Shepell Handbook of Canadian Pension & Benefit Plans, 17th Edition, 2020
    • Outcomes 6a, 6b, 6d, 6f, 6g
  • CP321-113-25: IAS 19: A Primer on Non-Pension Benefit Accounting for Valuation Actuaries
    • Outcomes 6a-6g
  • CP321-111-25: IAS19
    • Outcomes 6b, 6c
  • Health Care Trend Rate, CIA Educational Note, May 2012, pp. 4-17 only
    • Outcomes 6b, 6e, 6g
  • Setting the Accounting Discount Rate Assumption for Pension and Post-Employment Benefit Plans, CIA Educational Note, Dec 2020
    • Outcomes 6b, 6e, 6g
  • Practice-Specific Standards for Non-Pension Employee Future Benefit Plans (Effective February 1, 2024), CIA Standards of Practice, Dec 2023
    • Outcomes 6b, 6c, 6e, 6f
  • CP321-114-25: New Approaches Needed to Save Retiree Benefits
    • Outcomes 6d-6g
  • CP321-115-25: Mercer Quick Poll: 2022 Post-Retirement Benefit Trends - Supporting a Challenging Labour Environment
    • Outcomes 6d-6g
  • CP321-116-25: Retiree Health Benefits: Going, Going, Nearly Gone?
    • Outcomes 6d-6g