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100+ Free IFoA SP2 Practice Questions

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2026 Statistics

Key Facts: IFoA SP2 Exam

3h 20m

Exam Duration

IFoA

200 hrs

Recommended Study

IFoA

30%

Largest Topic Weight

SP2 2026 syllabus

5

Syllabus Areas

SP2 2026 syllabus

GBP 385

Standard Fee

IFoA fees

2x/year

Sittings (Apr & Sep/Oct)

IFoA

IFoA SP2 Life Insurance is a single 3 hour 20 minute computer-based written paper completed in Word, with around 200 recommended study hours and sittings in April and September or October. The 2026 syllabus weights are Risks and Risk Management 30%, Product Design and Features 25%, and 15% each for Products and Business Environment, Models and Valuation, and Monitoring Experience and Assumptions. The standard exam fee is around GBP 385 (reduced rate around GBP 220), and the Board of Examiners sets the pass mark each sitting rather than publishing a fixed percentage. This free set provides 100 multiple-choice technical-knowledge questions as preparation for the written exam.

Sample IFoA SP2 Practice Questions

Try these sample questions to test your IFoA SP2 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1A without-profits whole life assurance pays a fixed sum assured on death whenever it occurs. Which feature most distinguishes it from a term assurance contract?
A.It always provides cover for the whole of life, so a claim is certain provided premiums are paid
B.It contains a unit-linked investment account
C.It cannot have a single-premium version
D.It guarantees a maturity value at a fixed term
Explanation: Whole life assurance provides death cover for the entire lifetime of the policyholder, so a claim is virtually certain (subject to premiums being paid and no lapse). Term assurance only pays if death occurs within a fixed term, so most term policies expire without a claim.
2An insurer wants a savings product whose investment return is explicitly linked to the value of an underlying fund of assets, with the policyholder bearing most of the investment risk. Which contract design is most appropriate?
A.Conventional without-profits endowment
B.Unit-linked contract
C.Term assurance
D.Immediate annuity
Explanation: In a unit-linked contract the policy value is the number of units held multiplied by the unit price of the underlying fund, so investment performance passes directly to the policyholder, who bears most of the investment risk. This matches the requirement explicitly.
3Which of the following is the primary purpose of a with-profits (participating) life insurance contract from the policyholder's perspective?
A.To receive a guaranteed fixed return identical to a government bond
B.To obtain pure protection at the lowest possible premium
C.To share in the surplus of the with-profits fund through bonuses while obtaining smoothed investment returns and guarantees
D.To gain direct unit-by-unit exposure to equity markets
Explanation: With-profits contracts allow policyholders to participate in the distributed surplus of the fund via regular (reversionary) and terminal bonuses, benefiting from smoothing of returns and underlying guarantees. The insurer manages the investment and smoothing process.
4An immediate annuity is most exposed to which of the following risks for the insurer?
A.Lapse risk from early surrender
B.Expense overrun on new business acquisition only
C.Mortality risk that policyholders die earlier than expected
D.Longevity risk that annuitants live longer than assumed
Explanation: Annuity payments continue while the annuitant survives, so the insurer loses if annuitants live longer than assumed; this longevity risk is the dominant biometric risk for annuity business. Improvements in mortality increase the cost of meeting payments.
5Which statement best describes a critical illness (dread disease) policy?
A.It pays a lump sum on diagnosis of one of a defined list of serious medical conditions
B.It pays only on death within a fixed term
C.It refunds all premiums at maturity regardless of health
D.It pays a regular income only while the policyholder remains unable to work
Explanation: Critical illness cover pays a tax-free lump sum on the diagnosis of one of a specified list of conditions (such as certain cancers, heart attack or stroke), provided the policyholder survives any short survival period. It is a benefit triggered by diagnosis rather than death.
6Income protection (permanent health insurance) typically includes a deferred period. What is the main purpose of this feature?
A.To increase the sum assured over time
B.To reduce premiums and claims frequency by not paying benefits until a defined waiting period after disability has elapsed
C.To guarantee the policy can never lapse
D.To convert the benefit into a lump sum at maturity
Explanation: The deferred period is the time between the onset of incapacity and the start of benefit payments. A longer deferred period filters out short claims, reduces claim costs and so lowers premiums, and dovetails with any employer sick-pay arrangements.
7Which of the following best describes the role of distribution channels in life insurance product design?
A.They determine the statutory minimum solvency capital directly
B.They have no influence on product design
C.The chosen channel (independent advisers, tied agents, direct, bancassurance) influences product complexity, commission, target market and persistency assumptions
D.They only affect the layout of the policy document
Explanation: The distribution channel materially affects product design: advised channels can support more complex products and pay commission, while direct or online channels favour simpler products. The channel also affects expected persistency, target market and expense loadings.
8A guaranteed annuity option (GAO) attached to a deferred pension contract gives rise to which key risk for the insurer?
A.It only affects new business pricing, never the in-force book
B.It removes the need to hold reserves for the option
C.It eliminates all interest-rate risk
D.If interest rates fall and longevity improves, the guaranteed annuity rate may exceed market rates, creating a costly option for the insurer
Explanation: A GAO guarantees a minimum rate at which a pension fund converts to annuity income. It becomes valuable (in-the-money) when market annuity rates are lower than the guarantee, which happens when interest rates fall or longevity improves, creating significant cost. Such options must be reserved and hedged.
9When designing a new unit-linked product, which charging structure passes ongoing fund management costs to policyholders as a regular deduction?
A.Annual management charge (AMC) levied as a percentage of the fund value
B.Surrender penalty
C.Allocation rate above 100%
D.Bid-offer spread
Explanation: The annual management charge is a regular percentage deduction from the unit fund, designed to recover ongoing investment management and administration costs and contribute to profit. It is the principal recurring charge on unit-linked business.
10An insurer offers a unit-linked bond with both an initial (capital) unit account and accumulation units. What is the main purpose of using capital units?
A.To increase the policyholder's investment return
B.To recover initial expenses by applying a higher annual charge to early premiums held as capital units
C.To provide a guaranteed minimum maturity value
D.To eliminate mortality charges
Explanation: Capital (initial) units carry a higher annual management charge than accumulation units. Early premiums are invested in capital units so that the enhanced charge recovers high initial acquisition expenses over the policy term, a form of expense recoupment.

About the IFoA SP2 Exam

IFoA SP2 Life Insurance is a Specialist Principles fellowship subject that develops the principles of life insurance product design, pricing and profit testing, supervisory reserving and capital under Solvency II and IFRS 17, embedded value, with-profits surplus distribution, reinsurance, asset-liability management and risk management.

Assessment

One computer-based written paper of short and long open-response questions completed in Word

Time Limit

3 hours 20 minutes

Passing Score

Pass mark is set by the Board of Examiners for each sitting; results are reported as pass or fail with no fixed percentage published in advance

Exam Fee

Around GBP 385 standard (reduced rate around GBP 220); confirm the current figure on the IFoA fees page (Institute and Faculty of Actuaries (IFoA))

IFoA SP2 Exam Content Outline

15%

Life Insurance Products and Business Environment

Understand whole life, term, endowment, annuity, unit-linked, with-profits, critical illness and income protection contracts, their benefits and risks, distribution channels and the commercial and regulatory environment for life insurance.

25%

Product Design and Specific Features

Design contract features including reversionary and terminal bonuses, smoothing, asset shares, unit-linked charges and capital units, options and guarantees such as guaranteed annuity options, and surrender value bases.

30%

Risks and Risk Management

Identify and manage mortality, longevity, persistency, expense, anti-selection, market, credit, liquidity and operational risks, and use reinsurance, diversification, ERM, the ORSA and stress testing.

15%

Models and Valuation

Apply pricing and the equation of value, cash flow profit testing, net and gross premium valuation, Solvency II technical provisions and capital, IFRS 17 measurement, and embedded value and value of new business.

15%

Monitoring Experience and Setting Assumptions

Analyse actual versus expected experience, apply the actuarial control cycle and credibility, perform analysis of surplus, and set mortality, expense and persistency assumptions with appropriate margins.

How to Pass the IFoA SP2 Exam

What You Need to Know

  • Passing score: Pass mark is set by the Board of Examiners for each sitting; results are reported as pass or fail with no fixed percentage published in advance
  • Assessment: One computer-based written paper of short and long open-response questions completed in Word
  • Time limit: 3 hours 20 minutes
  • Exam fee: Around GBP 385 standard (reduced rate around GBP 220); confirm the current figure on the IFoA fees page

Keys to Passing

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

IFoA SP2 Study Tips from Top Performers

1Learn the five syllabus areas by weight and allocate study time accordingly, giving the most attention to Risks and Risk Management at 30% and Product Design at 25%.
2Practise explaining product features and risks in words, because SP2 rewards clear application and reasoning rather than recall of formulae alone.
3Get comfortable with Solvency II concepts (best estimate liability, risk margin, SCR, MCR, ORSA) and IFRS 17 measurement (fulfilment cash flows, risk adjustment, CSM, onerous contracts).
4Drill embedded value and profit testing numerically so that equation of value, profit signature and value of in-force calculations become automatic.
5Use past IFoA SP2 papers and examiners' reports to practise the written short and long-answer style under the 3 hour 20 minute time limit.

Frequently Asked Questions

How is the IFoA SP2 exam structured?

SP2 Life Insurance is a single computer-based written paper completed in Word, consisting of short and long open-response questions rather than multiple choice. It is a Specialist Principles subject on the IFoA fellowship pathway.

How long is the IFoA SP2 exam?

The SP2 paper lasts 3 hours 20 minutes. The IFoA recommends around 200 hours of study to prepare, and the subject is examined twice a year in April and September or October.

What is the passing score for IFoA SP2?

There is no fixed published pass percentage. The IFoA Board of Examiners sets the pass mark for each sitting based on the standard of the paper, and results are reported as pass or fail.

Which topics carry the most weight in SP2?

Risks and Risk Management is the largest area at 30%, followed by Product Design and Specific Features at 25%. Products and Business Environment, Models and Valuation, and Monitoring Experience each carry 15%.

How much does the IFoA SP2 exam cost?

The standard SP-subject exam fee is around GBP 385, with a reduced rate of about GBP 220 for eligible candidates. Always confirm the current figure on the IFoA exam fees page before booking.

Are these practice questions in the same format as the real SP2 exam?

No. The real SP2 exam uses written short and long-answer questions. This free set uses 100 multiple-choice questions to build and test the underlying technical knowledge that the written exam assumes.