2. Concepts, cadre et processus de la GRE

Question 1

What are the 5 main steps of the rating process in Best’s Credit Rating?

Answer 1

1. Compile information (financial statements, regulatory filings, ORSA)
2. Perform analysis (comparison to peers/industry standards)
3. Determine Rating
4. Disseminate rating
5. Monitor activities

Question 2

What are the 5 building blocks for rating life and P&C insurers according to DBRS?

Answer 2

1. Franchise Strength
2. Risk Profile
3. Earnings ability
4. Liquidity
5. Capitalization

Question 3

According to DBRS, what are 4 ways to assess franchise strength?

Answer 3

1. Market position
2. Distribution channels
3. Diversification of business or products
4. Strategic and operational excellence

Question 4

According to DBRS, what are 5 ways to assess a risk profile?

Answer 4

1. Product risk
2. Assessing management of credit risk in investment portfolio
3. Market risk
4. Operational risk
5. Risk management

Question 5

According to DBRS, what are 4 ways to assess earnings ability?

Answer 5

1. Revenue generation and profitability
2. Return on Equity (ROE)
3. Combined Ratio
4. Income stability

Question 6

According to DBRS, what is the way to assess liquidity?

Answer 6

Take into account characteristics of key assets and liability. Available liquid ressources, claims frequency, severity, collateral posting, stress testing.

Question 7

According to DBRS, what are 5 ways to assess Capitalization?

Answer 7

1. Capital cushion and ability to deal with troubled assets and stress
2. Financial leverage
3. Fixed-charge coverage ratio
4. Capital flexibility
5. Capital generation

Question 8

Define a risk limit

Answer 8

Thresholds to monitor
so that actual risk
exposure does not
deviate too much from
risk target and stays
within the organisation’s
risk tolerance and risk
appetite. Exceeding risk
limits will typically act as
a trigger for management
action

Question 9

Define a risk target

Answer 9

The optimal level
of risk that an
organisation wants
to take in pursuit of a
specific business goal

Question 10

Define a risk tolerance

Answer 10

The specific maximum risk
an organisation is willing
to take regarding each
relevant risk

Question 11

Define a risk appetite

Answer 11

The amount and type
of risk an organisation
is willing to accept in
pursuit of its strategic
objectives, balancing
both threats and
opportunities

Question 12

Define a risk capacity

Answer 12

The amount and type of
risk an organisation is able
to support in pursuit of its
business objectives

Question 13

What are the 4 main ways to deal with pure risk

Answer 13

1. Transfer
2. Retain
3. Avoid
4. Reduce

Question 14

Define Quantitative Risk Management (QRM)

Answer 14

QRM refers to the mathematical methods