1. Introduction

This guide introduces the Specialist Applications stage examinations. These examinations are also called the Fellowship examinations. The document has been prepared by the Chief Education Executive's Team on behalf of the Actuarial Profession to assist students preparing for these examinations. Its purpose is defined in the objectives listed above.

2. Choice of Specialist Applications stage subject

Each student is required to take one subject at the Specialist Applications stage level. It is expected that students will choose the subject area in which they are currently working but there is no requirement to do this.

3. The purpose of the Specialist Applications stage examinations

The Specialist Applications stage examinations test higher level skills and not detailed factual knowledge. The examiners in this paper will assume that you have considerable factual knowledge because it is difficult to demonstrate higher level skills without some raw material to work with and qualified actuaries are expected to have a considerable base of factual knowledge.

In addition you will need to be aware of the general principles of financial risk management to the level of detail contained in the Core Applications and the relevant Specialist Technical stage subjects.

4. UK Practice Module

If you are based in the UK you are encouraged to take the relevant UK Practice Module at the same time as you take the Specialist Applications paper as both are based on the same knowledge etc. You will need to have the material for the generic part as well.

5. The format of the examinations

The examination for each Specialist Application stage subject is three hours long, plus an additional fifteen minutes start for reading the paper, and if you choose to, making notes.

The examination will normally comprise two long questions although the examiners may set between one and three long questions. The emphasis will be on applying the higher level skills described in Section 6 to detailed practical situations. Although the paper will be based on the Core Reading, examiners may ask questions on different, but related, subjects to assess whether you can apply the general principles from the Core Reading to less familiar circumstances. This means that you will need to understand thoroughly the principles behind the Core Reading for the Core Applications, Specialist Technical and Specialist Applications stage subjects.

Questions will be based primarily on a core topic from the Core Reading. This does not mean that the question cannot move outwards from a core topic to a more unusual one. Requiring you to apply your understanding of a core topic to a less familiar one is a perfectly legitimate way for the examiners to test your understanding.

When they assess the paper the examiners will have some regard to your ability to communicate. There may be marks available for drafting; if so this will be clearly indicated on the paper.

A very rough guide to the distribution of the marks available might be:

• Knowledge: 28-56%
• Understanding: 28-56%
• Communication

The balance from question to question will be different and, in any case, it is not usually possible to divide everything neatly into one of the above categories.

6. The standard required

When considering the standard required to pass the Specialist Applications stage examinations you must bear in mind the examiners' principal criterion for passing which is "the fitness of the candidate to assume professional responsibilities in due course". If you are asked to draft a report or letter, take as your benchmark the standard that would be considered good enough to be signed by a partner or senior actuary in your firm. Of course, the examiners will take into account the fact that you are in an examination and you are working within the constraints of your experience and the breadth of your factual knowledge. Even so, always have this standard in mind when you are judging your own work. If the final result does not even approach this standard then you are aiming too low. One method of judging the appropriate standard is to imagine that you are sitting at your desk at work rather than in an examination.

7. Developing Specialist Applications skills

Resources | Core Reading | Study courses | Additional reading | Exam papers | Resources at work | Sharing with others

By higher level skills which are tested we mean skills such as:

• Analysis
• Synthesis
• Critical judgement
• Communication

These skills are needed by a practising actuary everyday. They are skills you should be using and developing all the time. So look upon the Specialist Applications stage not merely as a hurdle to overcome on the route to FIA or FFA, but also as an opportunity to develop the skills you will need throughout your working life.

The skills which we have identified as being necessary to perform well in the Specialist Applications stage examinations are not independent of each other. The act of producing a professional piece of work involves a cycle of analysis of the problem, marshalling the relevant facts, synthesis of the answer and critical evaluation of the product. The cycle is usually gone through several times before the final product is judged satisfactory. This is equally true for examinations and office work.

Communication skills are needed not only at the end of the process but all the way through. Communication involves receiving as well as imparting information. This means you need to have good communication skills in order to analyse the problem correctly as well as to produce a coherent solution. Skills learnt for the Communications examination (CA3 or its predecessors) are not needed solely for that examination - they are a very important aspect of the Specialist Applications stage examinations.

The most important factor required to pass Specialist Applications is a deep understanding of the subject. Your aim in drafting your answers to the questions on this paper is to communicate this understanding to the examiners. Do not spend a long time in trying to produce a work of literature, but do spend plenty of time planning the structure of your answers. Developing a logical structure will not only demonstrate your understanding but will help to ensure that you include those (and only those) points which are relevant.

You cannot develop the skill of structuring an answer well by merely making lists of points and then checking them off against a model answer. In your preparation you must make sure you practice producing a full answer from scratch. Many students do not have to do this at work, so practice is particularly important.

The resources available

The resources available to you in working towards the Specialist Applications stage examinations include:

• Core Reading for the appropriate subject at Core Applications, Specialist Technical and Specialist Applications stage levels
• Specialist Applications stage study courses provided by ActEd
• Additional reading material suggested in the Core Reading
• Other available reading material, both on technical matters and on wider skills
• Specimen Specialist Applications stage examination papers; past examination papers and Examiners' Reports for Paper Two of the 400 series subjects
• Resources available at work
• Sharing ideas with other students

You will probably be able to think of other sources of advice or material for study. The important thing is to identify those resources that will be most helpful to you and plan how to fit them into your study scheme. Often a variety of resources may help in covering the different requirements within each syllabus.

We will discuss drawing up a study plan later. First we will consider each item in the above list in more detail.

Core Reading in your chosen subject

You need to have a good knowledge of the Core Reading in your chosen subject. If you do not have an up-to-date course you are strongly advised to buy a copy of the current Core Reading.

Specialist Applications stage study courses

You are strongly advised to take a Specialist Applications stage study course with ActEd. However, you must use such a course as just one part of your own study scheme. You should not rely on the course provider to give you a checklist of what you need to do to pass the Specialist Applications stage examinations. This is, of course, true for all the subjects in the actuarial examinations but it is specially true for the Specialist Applications examinations.

Additional reading material suggested in the Core Reading

The purpose of the additional reading material suggested is to broaden your understanding of the subject. Read it critically and remember that you are not trying to add to a great deal to your factual knowledge. Rather, you are attempting to increase your awareness and understanding of the context in which the knowledge gained in the Specialist Technical stage subjects is applied. Read actively and be clear about your reasons for reading a particular document before you begin.

Other reading material

Look for other reading material that may be helpful to you. Examples might include:

• The trade press
• Papers published in the BAJ or other technical journals
• Reports from consulting actuaries, reinsurers, Government bodies etc
• Relevant documents that you come across at work
• Financial articles in newspapers

There is a great deal of potentially useful material available and you will have to be selective. Reading different articles is a good way of seeing how complicated ideas can be explained in different ways.

Specimen examination papers, past examination papers and Examiners' Reports

The first Fellowship examinations similar to the Specialist Applications stage were sat in April 1994. There are therefore several sets of past papers and Examiners' Reports available from Napier House. Study these carefully. You need to be aware, however, that there has been considerable development of the examinations since 1994 and read past papers and Examiners' Reports with this in mind. Do not waste a lot of time on detailed analysis of each question and the corresponding report. It is more useful to try to make sure you can identify the basic principles underlying the question and to see how the sample solution given by the examiners is constructed. Do not assume that the solution given by the examiners is the only acceptable answer, and bear in mind that some of the older Examiners' Reports contain little more than a checklist of points while others contain much more detail than would be realistic in an examination.

Resources available at work

Work is probably the main place where you will be practising and developing the skills needed to pass the Specialist Applications stage examinations. Try to take as must advantage of the opportunities available as possible (perhaps by offering to draft letters and reports for your seniors).

Read reports and letters and identify those of your colleagues who are good at presenting well-argued analyses of problems, and those who are less good. Compare their styles and apply what you have learnt to your own work.

Talk to your mangers about your preparation for the Specialist Application stage examination. They may be able to identify areas where you most need to improve and may be able to offer help in doing so.

Try to understand from other actuaries in your company how they tackle problem solving in an actuarial context.

Sharing with other students

Some students have found it helpful to meet together when preparing for the Fellowship examinations. You could form a group with fellow students to meet to analyse each others' attempts at questions, discuss the difficult parts of the course and review relevant actuarial papers. Students who have done this have found it valuable for developing judgement and communication skills and enlightening to learn what others liked or disliked about their approach to the problem. It helps them understand how others see what they have produced. It can also be fun in so far as studying is fun.

8. Making a study plan

Some people attempted the Fellowship examinations without following a structured scheme of study. They reasoned that they have enough day to day experience in their specialist field to answer the technical points and rely on their examination technique, developed since school, to apply this knowledge.

Many others concentrated on building up their factual knowledge of their specialist subject by reading all the information they could.

Neither of these approaches is likely to maximise your chance of success. Your study plan should recognise that in preparing for the Specialist Applications stage examinations you need to develop a combination of skills and that you have a number of different resources available.

Make a list of the different types of activities (reading, practising questions, revising your factual knowledge, attending tutorials etc) that you are going to use as part of your preparation and decide which skills they help to develop. Then decide what proportion of your time you are going to spend on each activity. Once you have done this, pencil in study time each week for appropriate activities. Be realistic about the amount of time for study, the topics to be covered and the skills to be practised in a particular week. Continually review areas of weakness and work out ways that you can solve the particular problems that you are facing. This discipline is as important in preparing for the Fellowship examinations as it was for the earlier examination.

The development of higher level skills depends on each individual. Only you can learn to think in a meaningful and productive way. No one else can do this for you. Try to discuss your plan with your manager or training officer at work so that you can include any work- related training courses as part of the plan.

Above all, recognise that the skills required to pass the Specialist Applications stage examinations are different from the skills needed to pass the earlier examinations and you will have to adopt a modified approach in your preparations.

9. Summary

In recent years the pass rates for the Fellowship examinations have been low. All those involved in the Committees looking at the examinations know this and want to do something about it. The conclusion reached by most of those who have looked into the reasons for the problem is not that the examiners are setting impossibly high standards. Instead the conclusion that most people have reached is that too many students are inadequately prepared. This is not necessarily a criticism of students. Part of the problem is claimed to be that students have been give insufficient guidance on how to prepare themselves. Having read this document you have taken the first step towards knowing what you need to do to prepare yourself. The next step is up to you. But if you make the effort to follow the suggestions in this document you will give yourself every chance of passing the Specialist Applications stage examinations.