Actuarial Notes

Exam ILA-101

ILA 101 – Pricing and Introduction to Valuation and Risk Management is an exam of the Society of Actuaries' Fellowship (FSA) pathway. Its syllabus covers the Nov 2026/Mar 2027/Jul 2027 sittings.

Learning Objectives

Individual Life and Annuity Product Design and Pricing (15–25%) The candidate will understand the designs of the common Life and Annuity products and their associated features and inherent risks, and the methods to design and price these products.

  1. Describe and compare various life insurance and annuity product designs
  2. Evaluate and apply pricing practices for life and annuity products
  3. Describe and apply the common profit metrics (IRR, Value of New Business, Embedded Value, ROE) used in pricing insurance products
  4. Explain and apply nonforfeiture calculation techniques

Readings:

  • ILA101-100-25: Life Products and Features (1a, 1b)
  • ILA101-101-25: Annuity Products and Features (1a, 1b)
  • Structured Settlement Annuities, SOA Research Institute, Mar 2022 (1a, 1b)
  • Pension Risk Transfer in Canada and the U.S., SOA Research Institute, Feb 2022 (1a, 1b)
  • Registered Index-Linked Annuities, SOA Research Institute, Aug 2022 (1a, 1b)
  • Life Insurance Acceleration Riders, SOA Reinsurance News, Jul 2013, pp. 35-38 (1a, 1b)
  • ILA101-102-25: Understanding Profitability in Life Insurance (1c)
  • ILA101-103-25: Ch. 9 of Life Insurance Products and Finance, Atkinson and Dallas (1c)
  • ILA101-104-25: Ch. 11, pp. 499-512 of Life Insurance Products and Finance, Atkinson and Dallas (1c)
  • ILA101-105-25: Life Insurance and Annuity Non-forfeiture Practices (1d)

Assumption Development and Experience Studies (15–25%) The candidate will understand different types of actuarial assumptions and how experience studies are designed and used for evaluating past experience and for setting assumptions.

  1. Describe types of actuarial assumptions commonly used for life insurance and annuity actuarial functions
  2. Describe and evaluate mortality, lapse, premium persistency, term conversions and utilization assumptions used for various purposes, and apply methods and techniques for their development
  3. Explain and apply actuarial credibility methods
  4. Describe and apply the framework, process, and significant considerations for creating modern mortality tables used by life insurance companies
  5. Describe the process and apply techniques for experience studies

Readings:

  • ILA101-106-25: Experience Assumptions for Individual Life Insurance and Annuities (2a)
  • ILA101-107-25: Lapse Supported Insurance Analysis (2b)
  • Educational Note Supplement: Selective Lapsation for Renewable Term Insurance Products, CIA, Feb 2017 (2b)
  • Report on Premium Persistency Assumptions Study of Flexible Premium Universal Life Products, May 2012, pp. 9-15 (2b)
  • Variable Annuity Guaranteed Living Benefits Utilization, SOA LIMRA Research, 2018, Executive Summary only (pp. 19-32) (2b)
  • Term Conversions: Pricing and Reserves, Product Matters, Mar 2017 (2b)
  • Predictive Models on Conversion Studies for the Level Premium Term Plans, SOA, Mar 2017 (2b)
  • Credibility Methods Applied to Life, Health, and Pensions, SOA, Feb 2019 (pp. 1-25 only) (2c)
    • Credibility Methods Companion Excel Files
  • Table Development, Feb 2018 (excluding Appendices C, D, F, G & H) (2d)
  • Experience Study Calculations, SOA, Oct 2016 (revised Mar 2024), sections 2-4, 11, 12, 15, 17 & 18 (excluding 18.2, 18.8 & 18.9) (2e)

Product Management (15–25%) The candidate will understand common issues and practices related to Product Management.

  1. Describe and assess insurance and annuity distribution approaches and underwriting approaches
  2. Describe and apply the significant US and Canadian tax regulations relating to the taxation of individual life and annuity insurance products
  3. Recommend and justify changes to non-guaranteed elements
  4. Describe and evaluate the challenges insurers face in a rising interest rate environment

Readings:

  • Life Insurance for the Digital Age: An End-to-End View, Product Matters, Nov 2017 (3a)
  • The Art and Science of Life Insurance Distribution, Bennett, Douglas J., and Zultowski, Walter H., 2014 (3a)
    • Ch. 3: The Primary Life Insurance Distribution Channels
    • Ch. 4: The Functions of Distribution in the Life Insurance Business
    • Ch. 6: Distribution Compensation
    • Ch. 7: The Economics of Life Insurance Distribution
    • Ch. 10: The Future of Life Insurance Distribution
  • ILA101-108-25: Chapters 1 and 2 of Life Insurance and Modified Endowments Under IRC §7702 and §7702A, Desrochers, 2nd Edition (3b)
  • ILA101-116-25: Ch. 10, The Taxation of Life Insurance Policies of Canadian Insurance Taxation, Swales, et. al. (3b)
  • Overview of Nonguaranteed Elements (NGEs), SOA Research Institute, Nov 2022 (3c)
  • Market Trends and Product Designs: Considerations When Interest Rates are Rising, Product Matters, Nov 2021 (3d)

Introduction to Life and Annuity Valuation Concepts (15–25%) The candidate will understand common valuation and capital techniques used in US, Canadian, and international regulatory frameworks.

  1. Describe the US statutory actuarial framework, including the principles-based reserves and calculate basic life insurance reserves
  2. Describe the US GAAP actuarial framework and calculate term insurance reserves and deferred acquisition cost
  3. Describe the IFRS actuarial framework, including the basic calculation of reserves
  4. Explain and apply methods in capital management across various jurisdictions

Readings:

  • Statutory Valuation of Individual Life and Annuity Contracts, Volume I, Claire, D., Lombardi, L. and Summers, S., 5th Edition, 2018 (4a)
    • Chapter 1: Overview of Valuation Concepts (excluding 1.1-1.9)
    • Chapter 11: Valuation Methodologies (excluding 11.3.9-11.3.11)
  • ILA101-110-25: Fundamentals of the Principle-Based Approach to Statutory Reserves for Life Insurance (4a)
  • ILA101-118-26: Chapter 1 of US GAAP for Insurers, Freedman, M., and Frasca, R., 3rd Edition, 2024 (4b)
  • ILA101-119-26: Chapter 5 of US GAAP for Insurers, Freedman, M., and Frasca, R., 3rd Edition, 2024 (4b)
  • ILA101-111-25: Insurance Contracts First Impressions: 2020 Edition IFRS 17, (only Sections 1.1-1.2, 3.1, 5.1-5.3, 6.1-6.4, 14.1-14.2, 15.1-15.2, 17.1-17.3, 20.1) (4c)
  • Regulatory Capital Adequacy for Life Insurance Companies: A Comparison of Four Jurisdictions, SOA Research Institute, Jul 2023 (4d)
    • Companion Excel Spreadsheet: Comparison of Jurisdictions Tool

Introduction to Assets and Risk Management (15–25%) The candidate will understand various techniques for addressing the mitigation of risk within a life insurance and annuity context.

  1. Describe and evaluate approaches for integrating ALM into an enterprise's risk and financial management framework
  2. Describe and apply the basic concepts of cash flow matching, immunization, duration/convexity matching, segmentation
  3. Describe how common insurance guarantees generate embedded options and calculate the value of these options
  4. Explain the function and attributes of common assets used to support life insurance and annuity liabilities
  5. Describe basic terms, concepts, and types of life insurance reinsurance arrangements
  6. Explain various methods and perform financial statement calculations of reinsurance transactions, including yearly renewable term, coinsurance, modified coinsurance, and funds withheld arrangements

Readings:

  • ILA101-112-25: Revisiting the Role of Insurance Company ALM within a Risk Management Framework (5a)
  • ILA101-113-25: Ch. 7 (sections 7.2-7.5 & 7A) of Derivatives Markets, McDonald, 3rd Edition (5b)
  • ILA101-114-25: Ch. 16 of ALM Management of Financial Institutions, Tilman, 2003 (5c)
  • An Introduction to Computational Risk Management of Equity-Linked Insurance, Feng, Runhuan, 2018 (5c)
    • Ch. 1: Modeling of Equity-linked Insurance
    • Ch. 4: Pricing and Valuation (excluding Section 4.7)
  • ILA101-115-25: Simulation of a Guaranteed Minimum Annuity Benefit, Freedman, 2019 (5c)
    • Excel Model - Stochastic Simulation of a GMAB Option (Accompanies Simulation of a GMAB)
  • ILA-117-25: Ch. 10, pp. 235-262, excluding exhibits 10-1 & 10-2, and Ch. 21 of Handbook of Fixed Income Securities, Fabozzi, F.J. (5d)
  • Life, Health & Annuity Reinsurance, Tiller, John E. and Tiller, Denise, 4th Edition, 2015 (5e)
    • Ch. 1: Basic Terms and Concepts (pp. 3-16 & 22)
    • Ch. 4: Basic Methods of Reinsurance
    • Ch. 5: Advanced Methods and Structures of Reinsurance

Source Material

Source Material

  • ILA101-100-25: Life Products and Features
    • Outcomes 1a, 1b
  • ILA101-101-25: Annuity Products and Features
    • Outcomes 1a, 1b
  • Structured Settlement Annuities, SOA Research Institute, Mar 2022
    • Outcomes 1a, 1b
  • Pension Risk Transfer in Canada and the U.S., SOA Research Institute, Feb 2022
    • Outcomes 1a, 1b
  • Registered Index-Linked Annuities, SOA Research Institute, Aug 2022
    • Outcomes 1a, 1b
  • Life Insurance Acceleration Riders, SOA Reinsurance News, Jul 2013, pp. 35-38
    • Outcomes 1a, 1b
  • ILA101-102-25: Understanding Profitability in Life Insurance
    • Outcomes 1c
  • ILA101-103-25: Ch. 9 of Life Insurance Products and Finance, Atkinson and Dallas
    • Outcomes 1c
  • ILA101-104-25: Ch. 11, pp. 499-512 of Life Insurance Products and Finance, Atkinson and Dallas
    • Outcomes 1c
  • ILA101-105-25: Life Insurance and Annuity Non-forfeiture Practices
    • Outcomes 1d
  • ILA101-106-25: Experience Assumptions for Individual Life Insurance and Annuities
    • Outcomes 2a
  • ILA101-107-25: Lapse Supported Insurance Analysis
    • Outcomes 2b
  • Educational Note Supplement: Selective Lapsation for Renewable Term Insurance Products, CIA, Feb 2017
    • Outcomes 2b
  • Report on Premium Persistency Assumptions Study of Flexible Premium Universal Life Products, May 2012, pp. 9-15
    • Outcomes 2b
  • Variable Annuity Guaranteed Living Benefits Utilization, SOA LIMRA Research, 2018, Executive Summary only (pp. 19-32)
    • Outcomes 2b
  • Term Conversions: Pricing and Reserves, Product Matters, Mar 2017
    • Outcomes 2b
  • Predictive Models on Conversion Studies for the Level Premium Term Plans, SOA, Mar 2017
    • Outcomes 2b
  • Credibility Methods Applied to Life, Health, and Pensions, SOA, Feb 2019 (pp. 1-25 only)
    • Credibility Methods Companion Excel Files (2c)
  • Table Development, Feb 2018 (excluding Appendices C, D, F, G & H)
    • Outcomes 2d
  • Experience Study Calculations, SOA, Oct 2016 (revised Mar 2024), sections 2-4, 11, 12, 15, 17 & 18 (excluding 18.2, 18.8 & 18.9)
    • Outcomes 2e
  • Life Insurance for the Digital Age: An End-to-End View, Product Matters, Nov 2017
    • Outcomes 3a
  • The Art and Science of Life Insurance Distribution, Bennett, Douglas J., and Zultowski, Walter H., 2014
    • Ch. 3: The Primary Life Insurance Distribution Channels (3a)
    • Ch. 4: The Functions of Distribution in the Life Insurance Business (3a)
    • Ch. 6: Distribution Compensation (3a)
    • Ch. 7: The Economics of Life Insurance Distribution (3a)
    • Ch. 10: The Future of Life Insurance Distribution (3a)
  • ILA101-108-25: Chapters 1 and 2 of Life Insurance and Modified Endowments Under IRC §7702 and §7702A, Desrochers, 2nd Edition
    • Outcomes 3b
  • ILA101-116-25: Ch. 10, The Taxation of Life Insurance Policies of Canadian Insurance Taxation, Swales, et. al.
    • Outcomes 3b
  • Overview of Nonguaranteed Elements (NGEs), SOA Research Institute, Nov 2022
    • Outcomes 3c
  • Market Trends and Product Designs: Considerations When Interest Rates are Rising, Product Matters, Nov 2021
    • Outcomes 3d
  • Statutory Valuation of Individual Life and Annuity Contracts, Volume I, Claire, D., Lombardi, L. and Summers, S., 5th Edition, 2018
    • Chapter 1: Overview of Valuation Concepts (excluding 1.1-1.9) (4a)
    • Chapter 11: Valuation Methodologies (excluding 11.3.9-11.3.11) (4a)
  • ILA101-110-25: Fundamentals of the Principle-Based Approach to Statutory Reserves for Life Insurance
    • Outcomes 4a
  • ILA101-118-26: Chapter 1 of US GAAP for Insurers, Freedman, M., and Frasca, R., 3rd Edition, 2024
    • Outcomes 4b
  • ILA101-119-26: Chapter 5 of US GAAP for Insurers, Freedman, M., and Frasca, R., 3rd Edition, 2024
    • Outcomes 4b
  • ILA101-111-25: Insurance Contracts First Impressions: 2020 Edition IFRS 17, (only Sections 1.1-1.2, 3.1, 5.1-5.3, 6.1-6.4, 14.1-14.2, 15.1-15.2, 17.1-17.3, 20.1)
    • Outcomes 4c
  • Regulatory Capital Adequacy for Life Insurance Companies: A Comparison of Four Jurisdictions, SOA Research Institute, Jul 2023
    • Companion Excel Spreadsheet: Comparison of Jurisdictions Tool (4d)
  • ILA101-112-25: Revisiting the Role of Insurance Company ALM within a Risk Management Framework
    • Outcomes 5a
  • ILA101-113-25: Ch. 7 (sections 7.2-7.5 & 7A) of Derivatives Markets, McDonald, 3rd Edition
    • Outcomes 5b
  • ILA101-114-25: Ch. 16 of ALM Management of Financial Institutions, Tilman, 2003
    • Outcomes 5c
  • An Introduction to Computational Risk Management of Equity-Linked Insurance, Feng, Runhuan, 2018
    • Ch. 1: Modeling of Equity-linked Insurance (5c)
    • Ch. 4: Pricing and Valuation (excluding Section 4.7) (5c)
  • ILA101-115-25: Simulation of a Guaranteed Minimum Annuity Benefit, Freedman, 2019
    • Excel Model - Stochastic Simulation of a GMAB Option (Accompanies Simulation of a GMAB) (5c)
  • ILA-117-25: Ch. 10, pp. 235-262, excluding exhibits 10-1 & 10-2, and Ch. 21 of Handbook of Fixed Income Securities, Fabozzi, F.J.
    • Outcomes 5d
  • Life, Health & Annuity Reinsurance, Tiller, John E. and Tiller, Denise, 4th Edition, 2015
    • Ch. 1: Basic Terms and Concepts (pp. 3-16 & 22) (5e)
    • Ch. 4: Basic Methods of Reinsurance (5e)
    • Ch. 5: Advanced Methods and Structures of Reinsurance (5e)