CAS Research & Industry Advancements 3

Question 1

The CAS Working Party on Generative AI in Actuarial Science is most concerned with which limitation of large language models for actuarial tasks?

Accepted Answer

Hallucination and lack of auditability in numerical outputs

Answer

Hallucination—generating plausible but incorrect outputs—and poor auditability are key concerns when applying LLMs to actuarial calculations requiring precision.

Question 2

In insurance research, 'loss development factor (LDF) selection' using machine learning differs from the volume-weighted average approach primarily because ML methods:

Accepted Answer

Can incorporate external covariates and detect structural breaks in development patterns

Answer

ML-based LDF selection can leverage external predictors (e.g., legal environment, inflation) and identify non-stationarity that simple averages miss.

Question 3

Which research technique is used to assess the marginal contribution of individual predictors in a black-box insurance pricing model?

Accepted Answer

SHAP (SHapley Additive exPlanations) values

Answer

SHAP values decompose a model's prediction into contributions from each feature, providing interpretability for complex models.

Question 4

The CAS research area of 'resilience modeling' for catastrophe risk focuses primarily on:

Accepted Answer

Quantifying post-disaster recovery trajectories and their impact on insured losses

Answer

Resilience modeling examines how quickly communities and economies recover after catastrophes, which directly affects loss development and business interruption claims.

Question 5

A key finding in CAS research on social inflation is that it is primarily driven by:

Accepted Answer

Changes in jury verdicts, litigation funding, and plaintiff attorney tactics increasing loss severity

Answer

Social inflation refers to rising claim costs driven by legal system changes—nuclear verdicts, third-party litigation funding, and aggressive plaintiff strategies.

(CAS) Casualty Actuarial Society Practice Test

(CAS) Casualty Actuarial Society Practice Test

CAS Research & Industry Advancements 3