PracticeVideosBlogFlashcardsEspañol
All Practice Exams

Free Practice Questions for IAI CB3

Exam-style questions and explanations by OpenExamPrep.

✓ No registration✓ No credit card
100+ Questions
100% Free

Loading practice questions...

Same family resources

Explore More Institute of Actuaries of India Exams

Continue into nearby exams from the same family. Each card keeps practice questions, study guides, flashcards, videos, and articles in one place.

ACET — Actuarial Common Entrance Test (Institute of Actuaries of India)

Practice Questions

IAI Subject CB1 — Business Finance (Institute of Actuaries of India)

Practice Questions

IAI Subject CB2 — Business Economics (Institute of Actuaries of India)

Practice Questions

IAI Subject CM1 — Actuarial Mathematics (Institute of Actuaries of India)

Practice Questions

IAI Subject CM2 — Financial Engineering and Loss Reserving (Institute of Actuaries of India)

Practice Questions

IAI Subject CP1 — Actuarial Practice (Institute of Actuaries of India)

Practice Questions
Exam Review

Key Facts: IAI CB3 Exam

90 min

Exam Duration

IAI examination timetable

₹3,000

Examination Fee

IAI exam fee schedule

50%

Pass Mark

IAI Pass Mark Rule (from November 2025)

20–30%

Share of Marks from MCQs

IAI examination FAQ

100

Practice Questions

OpenExamPrep

IAI Subject CB3 Business Management is one of the seven Core Principles subjects required for the Associate (AIAI) qualification of the Institute of Actuaries of India. The official examination lasts 90 minutes, is closed book, is taken at an authorised centre on the IAI online platform, and combines a multiple-choice section worth 20% to 30% of the marks with descriptive short answers; the entry fee is ₹3,000 for India and SAARC candidates and the pass mark is 50%. OpenExamPrep provides 100 independent English-language multiple-choice practice questions covering the CB3 topics. Because only part of the real paper is multiple-choice, this set is a study aid for the underlying knowledge and judgement and is not a simulation of the official paper or a substitute for practising descriptive answers. IAI has announced that from the November 2027 session CB3 and CP3 will merge into a single subject, CP3 Strategic Management and Communication.

Sample IAI CB3 Practice Questions

Try these sample questions to review concepts for the IAI CB3 exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under the Insurance Regulatory and Development Authority Act, 1999 (IRDA Act), what is the statutory primary mandate of the IRDAI as stipulated under Section 14?
A.To directly set premium rates and mandatory dividend distribution quotas for all commercial insurers
B.To protect the interests of holders of insurance policies and to regulate, promote, and ensure orderly growth of the insurance industry
C.To operate as the lender of last resort and monetary authority for all non-banking financial companies
D.To act as the sovereign guarantor for all life insurance annuity payouts and claim liabilities
Explanation: Section 14 of the IRDA Act, 1999 defines the duties, powers, and functions of the Authority. Its core statutory mandate is to protect the interests of holders of insurance policies and to regulate, promote, and ensure the orderly growth of the insurance and reinsurance industry in India.
2Section 64VA of the Insurance Act, 1938, read with IRDAI regulations, prescribes the Required Solvency Margin (RSM) for insurers in India. What is the statutory Control Level of Solvency specified by the IRDAI?
A.A Solvency Ratio of 100%, below which an insurer must immediately cease operations and enter liquidation
B.A Solvency Ratio of 125%, which triggers an automatic transfer of policy liabilities to the Life Insurance Corporation of India
C.A Solvency Ratio of 150%, below which the insurer must submit a financial restoration plan and face heightened regulatory intervention
D.A Solvency Ratio of 200%, below which an insurer is prohibited from investing in sovereign government securities
Explanation: Under IRDAI (Assets, Liabilities, and Solvency Margin) Regulations and Section 64VA of the Insurance Act 1938, the statutory Control Level of Solvency is a Solvency Ratio of 150% (Available Solvency Margin / Required Solvency Margin >= 1.5). Breaching this level mandates the submission of a financial restoration plan and triggers regulatory corrective actions.
3Under the IRDAI (Appointed Actuary) Regulations, which of the following best describes the statutory reporting obligation of the Appointed Actuary when they identify a material violation or solvency risk that the company's board refuses to rectify?
A.The Appointed Actuary has a statutory duty to inform the IRDAI directly in writing without delay
B.The Appointed Actuary must maintain corporate confidentiality and report the matter solely to the company's internal audit committee
C.The Appointed Actuary must immediately resign without stating any reasons to avoid commercial defamation
D.The Appointed Actuary is protected by legal privilege and prohibited from disclosing internal actuarial findings to external regulators
Explanation: The Appointed Actuary holds a statutory position with a direct whistleblowing duty to the regulator. If the Board of Directors fails to take appropriate action on a material actuarial concern or regulatory non-compliance that impairs policyholder security, the Appointed Actuary is legally obligated under IRDAI regulations to notify the IRDAI directly in writing.
4Under the Reserve Bank of India Act, 1934 (as amended in 2016), the Monetary Policy Committee (MPC) is constituted to determine the policy repo rate. Which of the following statements regarding the composition and voting procedure of the MPC is correct?
A.The MPC consists of five members, all appointed directly by the Ministry of Finance, with decisions requiring a unanimous vote
B.The MPC consists of seven members headed by the Union Finance Minister, who possesses a statutory veto over interest rate adjustments
C.The MPC consists of six members from the RBI only, with decisions finalized exclusively by simple majority of the deputy governors
D.The MPC consists of six members (three from RBI and three appointed by Central Government), where each member has one vote and the RBI Governor has a second or casting vote in the event of a tie
Explanation: Under Section 45ZB of the amended RBI Act, the MPC consists of six members: the RBI Governor (Chairperson), the Deputy Governor in charge of monetary policy, one officer of the RBI nominated by the Central Board, and three external members appointed by the Central Government. Each member has one vote, and in case of a tie, the Governor has a casting vote.
5In the Indian banking regulatory framework, what is the primary operational distinction between the Cash Reserve Ratio (CRR) and the Statutory Liquidity Ratio (SLR)?
A.CRR is maintained entirely in gold and foreign currency assets, whereas SLR is maintained strictly in physical cash currency chests
B.CRR must be maintained as non-interest-bearing cash balances with the RBI, whereas SLR is maintained by banks in approved unencumbered securities, cash, or gold, earning income
C.CRR applies exclusively to private and foreign commercial banks, whereas SLR applies solely to public sector commercial banks
D.CRR can be satisfied by subscribing to equity shares of listed financial institutions, whereas SLR requires liquid central bank deposits
Explanation: CRR is the fraction of Net Demand and Time Liabilities (NDTL) that commercial banks must maintain as cash balances directly with the RBI (on which the RBI currently pays no interest). SLR is the fraction of NDTL that banks must maintain in liquid unencumbered approved assets such as Central/State Government securities, treasury bills, cash, and gold, which generate investment yield.
6Under the Reserve Bank of India's revised Prompt Corrective Action (PCA) framework for commercial banks, which set of key financial metrics serves as the primary tracking indicators to determine regulatory intervention?
A.Capital (CRAR/CET1 ratio), Asset Quality (Net NPA ratio), and Leverage (Tier 1 Leverage ratio)
B.Gross domestic credit growth, total branch expansion rate, and return on equity (ROE)
C.Net interest margin (NIM), sovereign debt holdings proportion, and employee productivity ratio
D.Current account to savings account (CASA) ratio, foreign exchange turnover, and market capitalization
Explanation: The RBI's revised PCA framework monitors banks across three key risk areas: Capital (Capital to Risk-weighted Assets Ratio - CRAR and Common Equity Tier 1 - CET1), Asset Quality (Net Non-Performing Advances - NNPA ratio), and Leverage (Tier 1 Leverage ratio). Breaching designated risk thresholds across these indicators triggers progressive supervisory restrictions.
7An employer establishes a gratuity fund as an irrevocable trust for the benefit of its employees. Under general principles of Indian trust law, which statement best describes the position of the trustees?
A.The trustees hold the fund as their own property and may apply it to the employer's general corporate purposes
B.The trustees owe their duties to the employer that created the trust rather than to the beneficiaries
C.The trustees hold legal title to the fund but must deal with it solely for the benefit of the beneficiaries, exercising reasonable care, keeping proper accounts and avoiding any conflict between duty and personal interest
D.The trustees may delegate every decision to the employer's finance director and are absolved of liability once they do so
Explanation: A trust separates legal ownership from beneficial ownership: the trustees hold legal title to the trust property while the beneficial interest belongs to the beneficiaries. The core trustee duties are to act within the powers conferred by the trust deed, to act solely in the beneficiaries' interests, to exercise the care a prudent person would apply to their own affairs, to keep proper accounts and provide information, and to avoid any position where personal interest conflicts with duty. An actuary advising a benefit fund needs to know where those duties sit, because it determines to whom the advice is owed.
8Under the SEBI (Prohibition of Insider Trading) Regulations, 2015, which institutional governance mechanism is mandatory for listed financial firms and intermediaries to prevent the illicit transmission of Unpublished Price Sensitive Information (UPSI)?
A.An open-access shared enterprise drive containing all real-time valuation models and internal audit drafts
B.A discretionary verbal agreement among senior managers without formal logging or physical segregation of teams
C.Requiring all employees to publish their personal stock portfolios on a public web page weekly
D.Establishing and maintaining structural 'Chinese Walls' supported by physical and electronic segregation of departments and digital structured digital databases (SDD)
Explanation: SEBI PIT Regulations mandate that entities handling UPSI maintain internal structural controls, commonly known as Chinese Walls, to separate departments possessing UPSI from trading or public-facing desks. Entities must also maintain a tamper-proof Structured Digital Database (SDD) with time-stamped logs of persons with whom UPSI is shared.
9Under the National Pension System (NPS) regulated by the PFRDA, what is the primary fundamental distinction between a Tier I and a Tier II account?
A.Tier I is a non-withdrawable retirement pension account with statutory tax benefits and withdrawal restrictions, whereas Tier II is a voluntary savings facility with unrestricted liquidity and no special tax concessions
B.Tier I is exclusively open to government employees with guaranteed defined benefits, whereas Tier II is open only to private corporate subscribers with market-linked returns
C.Tier I permits 100% unrestricted equity allocation at any age, whereas Tier II restricts equity investment to a maximum cap of 15%
D.Tier I does not require mandatory annuitisation at retirement age, whereas Tier II mandates 80% annuitisation of the accumulated corpus
Explanation: NPS Tier I is the mandatory core retirement account that provides tax exemptions under the Income Tax Act (Sections 80CCD(1), 80CCD(1B), and 80CCD(2)), subject to strict lock-in and mandatory annuitisation at exit. Tier II is an add-on, voluntary investment facility from which subscribers can withdraw funds at any time, but standard contributions do not enjoy retirement tax benefits.
10In the institutional architecture of the National Pension System (NPS) established by the PFRDA, what is the specific role of the Central Recordkeeping Agency (CRA)?
A.To manage investment portfolios and execute asset allocation strategies in capital markets
B.To provide recordkeeping, administration, subscriber registration, and transaction processing across the entire lifecycle of the PRAN
C.To act as the legal owner and custodian of all pension assets on behalf of subscribers
D.To settle inter-bank payments and physically hold sovereign debt certificates
Explanation: The CRA (such as Protean eGov Technologies or KFin Technologies) is the central operational backbone of the NPS. It is responsible for subscriber registration, issuing Permanent Retirement Account Numbers (PRAN), maintaining account ledgers, processing contributions and redemptions, and transmitting instructions to Pension Fund Managers and Trustee Bank.

About the IAI CB3 Exam

IAI Subject CB3 Business Management is a Core Principles subject of the Institute of Actuaries of India covering the business environment an actuary works in, strategic thinking and business decision making, the basic legal principles relevant to actuarial work, and professionalism and ethics. The official examination is a 90-minute centre-based online paper that mixes a multiple-choice section with descriptive short answers.

Exam sponsor: Institute of Actuaries of India (IAI). The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

90-minute closed-book centre-based online examination in two parts: a multiple-choice section worth 20% to 30% of total marks and a descriptive short-answer section typed into the examination platform. From November 2024 the former business simulation game and pre-course assignments are no longer prerequisites for the CB3 exam.

Time Limit

90 minutes

Passing Score

50% of total marks under the IAI Pass Mark Rule applicable from the November 2025 session; marks are rounded up to the next whole number and the final pass mark for each subject is confirmed with the results

Exam / Certification Fees

₹3,000 (INR) for India and SAARC candidates

Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Official sources

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

Not published

Working as an Actuary in Financial Services

Skills a competent practising actuary must acquire, knowledge of the employing company and of the financial services industry, the global economic and political backdrop, the activities of the IAI, and the current issues facing life, pensions, general insurance, health, finance, investment and enterprise risk management.

Not published

Strategic Thinking

Strategy and competitive advantage, a process for strategic decision making, PEST analysis, identifying and prioritising business and consumer needs, the industry value chain, combating competitive forces, communicating strategic messages, and the effect of company culture and structure on decisions.

Not published

Business Decision Making

Mission statement and business strategy, teamwork, time management, extracting relevant information from large volumes of data, interaction between company functions, people skills and influence, developing a decision-making process, and attitude to risk in decision making.

Not published

Basic Legal Principles

Sources of Indian law, requirements for a valid contract, implied terms, exclusion of liability, contractual remedies and a basic award of damages, professional negligence, trusts and trustee duties, agency and types of authority, separate legal personality and limited liability, directors and shareholders, and partnership.

Not published

Professionalism and Ethics

Characteristics of a profession, the Actuaries' Code and the IAI Professional Conduct Standards, how the Actuaries Act, 2006 and the IAI regulate actuarial work, the corporate governance structure of the IAI, and case studies in professionalism and ethics.

Preparing for the IAI CB3 Exam

What You Need to Know

  • Passing score: 50% of total marks under the IAI Pass Mark Rule applicable from the November 2025 session; marks are rounded up to the next whole number and the final pass mark for each subject is confirmed with the results
  • Assessment: 90-minute closed-book centre-based online examination in two parts: a multiple-choice section worth 20% to 30% of total marks and a descriptive short-answer section typed into the examination platform. From November 2024 the former business simulation game and pre-course assignments are no longer prerequisites for the CB3 exam.
  • Time limit: 90 minutes
  • Exam / certification fees: ₹3,000 (INR) for India and SAARC candidates Official sources

Using Our Practice Resources

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

IAI CB3: Suggested Study Strategy

1Read the IAI Professional Conduct Standards end to end; ethics scenarios turn on the specific wording of sections 2, 3, 6, 7 and 8.
2Know the disciplinary route in Chapter IV of the Actuaries Act, 2006: Disciplinary Committee, Prosecution Director, Council findings and the sanctions available under section 30.
3Practise applying PEST, the value chain and competitive analysis to an Indian financial services scenario rather than memorising the frameworks in the abstract.
4Cover the legal objectives at the overview depth the syllabus specifies, including trusts, agency, partnership, exclusion of liability and a basic award of damages.
5Sit at least one timed 90-minute attempt that mixes quick multiple-choice work with 10-mark short answers written in four to six sentences per sub-part, as in the IAI sample paper.

Frequently Asked Questions

What is the format of the IAI CB3 exam?

CB3 is a 90-minute closed-book centre-based online examination taken at an authorised IAI centre. It has a multiple-choice section carrying between 20% and 30% of total marks and a descriptive short-answer section typed into the examination platform. There is no negative marking.

What is the pass mark for IAI CB3?

Under the IAI Pass Mark Rule applicable from the November 2025 session, a candidate passes CB1, CB2 or CB3 by scoring at least 50% of the marks, rounded up to the next whole number. IAI confirms the final pass mark for each subject when it publishes the results.

What is the examination fee for IAI CB3?

The CB3 entry fee is ₹3,000 (INR) for candidates in India and SAARC countries, per the published IAI exam fee schedule. Examinations are held twice a year, in the May and November sessions.

Is CB3 changing?

Yes. Under the IAI Education Policy 2026, CB3 Business Management and CP3 Communications Practice will merge from the November 2027 examination session into a single subject, CP3 Strategic Management and Communication, examined by one written paper of 3 hours 15 minutes. Passes and exemptions obtained up to 31 December 2028 are recognised under the transition arrangements. CB3 continues to be examined in its own right until then.

How do these OpenExamPrep questions relate to the official exam?

They are independent practice questions written by OpenExamPrep for the CB3 topics. Only part of the official paper is multiple-choice, so this set is a study aid for the underlying knowledge and judgement rather than a simulation of the official format, and it is not a substitute for practising descriptive answers. OpenExamPrep is not affiliated with the Institute of Actuaries of India and these are not official exam materials.