IAI CB3 cheat sheet

CB3 is a Certificate-level exam in the IAI (Institute of Actuaries of India) sequence; it sits between the foundation/technician stage and the higher Associate-level subjects.

CB3 is assessed by a written examination; candidates must pass it to progress toward Fellowship, and it carries the certificate-level weighting rather than the heavier associate-level credit.

The exam tests applied, communication-oriented actuarial work rather than pure mathematical derivation; answers are judged on clarity, structure, and correct use of technical vocabulary.

The syllabus is delivered by IAI and is aligned in style with the international actuarial profession's certificate-level communication and professional-practice subjects; IAI publishes the authoritative syllabus and reading list.

Content is examined in English; standard actuarial and financial terms are expected in English even where candidates write in another language.

Questions typically require a short report, memo, or structured answer addressed to a defined audience, so audience, purpose, and format are assessed alongside content.

Marks are commonly allocated to structure, relevance, accuracy, and professional tone, not only to the final numerical result.

Where the source syllabus does not enumerate sub-topics, candidates should treat the IAI-published syllabus and any examiners' reports as the definitive content boundary.

needs_review: this platform's source did not enumerate CB3 content domains, so the domain split below is an inference and should be checked against the current IAI syllabus.

Structure rule: a professional actuarial report opens with purpose and scope, then assumptions/data, then analysis, then conclusions and recommendations, then limitations.

Audience rule: a board or client summary states the decision and the number first; technical derivation and caveats go into an appendix or later section.

Precision rule: round to the precision the decision needs (for example ₹ crore or ₹ lakh for large sums) and state the rounding convention once, not per figure.

Jargon rule: define each technical term at first use; if the reader is non-technical, replace the term with a plain-language equivalent plus a parenthetical definition.

Assumption disclosure rule: every material assumption is stated with its source and its sensitivity; an unstated assumption is a communication failure, not a simplification.

Uncertainty rule: express results as a range or with an explicit confidence qualifier rather than a single false-precision point estimate when the model is uncertain.

Recommendation rule: each recommendation must be actionable - it names the decision, the owner, and the consequence of not acting.

Length rule: exam answers should match the marks available; a rough working guide is about one substantive sentence per mark, with a short plan before writing.

Data-quality checks to name explicitly: completeness, accuracy, consistency over time, relevance to the purpose, and reasonableness against external benchmarks.

Reconciliation rule: before modelling, reconcile the data to a control total (for example the audited financial statements or the prior valuation) and explain any residual difference.

Assumption categories to separate: demographic (mortality, morbidity, lapse, retirement), economic (interest, inflation, salary growth), and expense.

Sensitivity rule: present the effect of a change in each key assumption on the headline result, ranked by impact, so the reader sees which assumption drives the answer.

Model-limitation disclosure: state what the model does not capture (for example no allowance for new business strain, no stochastic tail) rather than implying the model is complete.

Back-testing rule: compare model output with actual past experience and report the size and direction of the divergence.

Aggregation caution: results for a total portfolio can differ from the sum of segment results when assumptions or correlations are non-linear; state the level at which results are produced.

Documentation rule: a reproducible result records data source and date, assumption set and version, model version, and the person who signed off.

Actuarial Standards of Practice issued by IAI govern the content of actuarial advice; the communication must state that the work complies with the applicable standards.

The IAI Code of Conduct requires integrity, competence, objectivity, confidentiality, and compliance with the law; a conflict of interest must be disclosed, not silently managed.

Independence rule: where the actuary has a financial or personal interest in the outcome, that interest is disclosed in the report and, if material, the engagement is declined or reviewed independently.

Confidentiality rule: client data may only be used for the agreed purpose; sharing with third parties requires consent or a legal obligation.

Peer review rule: material advice is reviewed by another qualified actuary before release where the standard or engagement requires it.

Regulatory context to name where relevant: IRDAI for insurance, PFRDA for pensions, and the applicable Companies Act provisions for statutory valuations in India.

Professional-secrecy and whistleblowing: a legal or regulatory duty to report overrides client confidentiality, and the actuary documents the disclosure made.

Record-keeping rule: retain working papers and correspondence for the period required by the applicable standard so the advice can be reconstructed later.

Time rule: allocate minutes roughly in proportion to marks, and reserve a few minutes at the end for checking arithmetic and units.

Plan rule: spend the first minutes of each question writing a three-to-five point skeleton, then expand; this secures structure marks even if time runs short.

Command-word rule: 'state' needs a fact only, 'explain' needs the mechanism, 'discuss' needs both sides plus a conclusion, 'calculate' needs working shown.

Show-working rule: method marks survive an arithmetic slip, so write the formula, the substituted values, and the units before the final figure.

Units rule: state currency and time basis (per annum, per month) with every rate; a correct number with the wrong basis is marked wrong.

Assumption rule: if a question omits a needed input, state a reasonable assumption explicitly and proceed rather than leaving the answer blank.

Presentation rule: use headings, short paragraphs, and labelled tables; examiners mark against a scheme and clear layout makes each mark easy to award.

Common failure modes: answering the question asked rather than the one imagined, ignoring the stated audience, and omitting a conclusion or recommendation.

Worked pattern: for a pricing or valuation question, state the purpose, list the cash-flow components, state the discount and decrement assumptions, compute, then interpret the result for the decision-maker.

Cash-flow rule: net cash flow in a period equals premiums or contributions plus investment income minus claims, expenses, and taxes; state the sign convention used.

Discounting rule: present value equals the sum over periods of cash flow divided by (1+i) raised to the period count; state whether i is nominal or effective and the compounding frequency.

Reserving rule: a reserve is the present value of expected future outgo minus expected future income, on the stated basis; changing the basis changes the reserve, so the basis is always disclosed.

Experience-monitoring rule: compare actual versus expected on the same basis, split the variance into volume and rate effects, and report the split.

Risk-communication rule: describe risk as likelihood and impact, and distinguish diversifiable from non-diversifiable risk in plain language for a non-technical reader.

Recommendation pattern: give the recommended option, the two or three reasons ranked by importance, the main risk of the recommendation, and the trigger that would change the advice.

Sanity-check rule: compare any computed figure to an order-of-magnitude estimate and to the prior period before presenting it; an unexplained jump is a red flag to investigate.