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The AIAF exam has 50 questions and runs 1 hour 5 minutes.
These 10 free AIAF questions are organized by exam domain, so you can see how each part of the Associate in Insurance Accounting and Finance blueprint is tested. Reveal the answer and explanation under each question.
The annual premium reconciliation shows $96 million of direct written premiums, $14 million of assumed written premiums, and $22 million of ceded written premiums. The net unearned premium reserve increased from $30 million to $41 million. With no other premium adjustments, what net earned premium should be reported?
Correct answer: B - $77 million
A casualty insurer begins setting fuller case reserves when claims are first reported. At the next valuation, reported incurred losses at early development ages rise sharply, while paid losses and claim counts remain stable. A claim-file review finds no change in expected ultimate claim costs. Applying the old reported-loss development factors now produces much higher ultimate estimates. What most likely explains the apparent deterioration?
Correct answer: B - Earlier case-reserve recognition has made the historical development pattern unsuitable.
Near quarter-end, an insurer pays substantial commissions on newly issued short-duration policies. The commissions qualify for recoverable deferral under U.S. GAAP, and most of the related premium is still unearned. Acquisition-cost timing is the only difference between its GAAP and statutory results. Ignoring taxes, what comparison should the controller expect?
Correct answer: C - Statutory income and surplus are lower, although the commission cash outflow is the same.
An insurer files a risk-based capital ratio of 170%, using total adjusted capital divided by Authorized Control Level RBC. Its state applies the NAIC Risk-Based Capital for Insurers Model Act, and no other action-level event has occurred. Which response follows from this capital result?
Correct answer: A - Company Action Level: the insurer must submit a corrective RBC plan to the insurance regulator.
Hours before catastrophe claim payments are due, treasury identifies a temporary cash shortfall. Reinsurance collections are expected in ten business days. Capital remains adequate, and an approved committed credit facility can fund the full shortfall today within all borrowing limits. Its borrowing cost is lower than the loss on an immediate bond sale. Which action best addresses the payment emergency?
Correct answer: C - Draw the committed facility and release the scheduled claim payments on time.
A homeowners application is flagged for decline because an automated screening service labels the dwelling vacant. The underwriter verifies that it is owner-occupied and that all other eligibility criteria and portfolio limits are met. She has authority both to correct verified data errors and to bind this risk. The appropriate disposition is to:
Correct answer: D - Correct the occupancy record and bind coverage on the authorized owner-occupied terms.
A contractor changes liability insurers on January 1, 2026. Both the expiring and replacement policies provide occurrence coverage. A covered injury took place on December 18, 2025, but the claim was first reported on February 4, 2026. Notice requirements are satisfied, and there is no continuing injury or other coverage complication. Which allocation is appropriate?
Correct answer: D - Assign the claim to the expiring policy because the injury occurred during its coverage term.
One hurricane causes covered property losses of $3.5 million at one insured location and $4.5 million at another. The catastrophe treaty treats both losses as one occurrence and provides $5 million excess of $2 million per occurrence. Reinsurer participation is 100%, the recovery is collectible, and no other reinsurance applies. Ignoring loss adjustment expenses, how much of the event loss does the ceding insurer retain?
Correct answer: B - $3 million
At a board meeting, an insurer highlights its higher return on equity. Net income is unchanged, but average equity fell after a large shareholder dividend. Insurance exposures and the asset mix are unchanged. How should the board interpret the higher return?
Correct answer: C - The improvement reflects a smaller equity base rather than increased earnings.
An insurer preparing U.S. GAAP statements holds available-for-sale bonds and small, passive holdings of exchange-traded common shares. Both lose market value this quarter. The bond decline is entirely attributable to higher market yields; there is no credit loss, intention to sell, or expected need to sell before recovery. No hedge accounting, consolidation, or equity-method accounting applies. Where are the unrealized losses recognized?
Correct answer: A - The bond loss in other comprehensive income; the common-share loss in net income.
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