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IAI SA3 study materials
IAI SA3 study resources

IAI SA3: General Insurance Products, Markets and the Operating Environment

IAI SA3 · Work through your exam, one topic at a time.

All guide sections

General Insurance Products, Markets and the Operating Environment

SA3 is the specialist applications paper for general insurance: it takes the technical toolkit - pricing, reserving, reinsurance, capital and risk management - and applies it to the ill-defined business problems actuaries actually face. Questions give you a portfolio, a class of business or a company under stress, and ask what you would do, why, and what could go wrong; marks sit with judgement and quantification, not definitions.

Know the product before you model it

  • Occurrence vs claims-made: occurrence cover attaches to the policy in force when the event happens; claims-made attaches to the policy in force when the claim is notified, with a retroactive date defining the earliest covered act.
  • Limit structure: per-claim, per-event, aggregate, reinstatements, and whether defence costs sit inside or outside the limit - each changes the tail you are modelling.
  • Conditions: warranties, exclusions, deductibles and sub-limits are pricing levers and reserving traps.
  • Environment: the underwriting cycle, distribution economics and local regulation (product filing, tariffed lines, capital rules) constrain what a technical answer can sensibly recommend.

Worked example

A professional indemnity (PI) policy is written on a claims-made basis for 2024 with a retroactive date of 1 January 2020 and a ₹5 crore aggregate. A negligent act in November 2019 is notified in 2025; a second act in March 2022 is notified in 2024.

  • The 2019 act is excluded - it predates the retroactive date.
  • The 2022 act attaches to the 2024 underwriting year, the year of notification, not the year of the act.

Consequently the 2024 reserve must include an allowance for claims not yet notified (the reporting tail), and the PI development pattern will keep emerging for years after the policy expires. Reserving this business on an occurrence pattern would materially understate the liability.

Traps that cost marks

Treating an aggregate limit as per claim; reserving claims-made business on occurrence patterns; ignoring the reporting tail; assuming the liability ends when the policy term ends.