2012 Test 1 Flashcards
For a life insurance company issuing non-profit life insurance policies, explain why a higher than expected withdrawal rate presents a risk to the company.
- If withdrawal is before the initial expenses have been recouped, a loss will be made
- Selective withdrawal: heavier mortality than originally
- Liquidity issues (if large number of withdrawals)
- Loss of market share
Average clause
If, at the time you have a partial loss, the sum insured is less than the full value of the property, then the insurance benefit will be reduced to the same proportion the sum insured bears to the full value.
In-the-money
The strike price is greater than the price of the underlying asset
Out-of-the-money
The strike price is less than the price of the underlying asset.
Why may the short term split of assets differ from the strategic investment position
To take advantage of perceived mispricing.
Risk matrix
A matrix listing the various stages of a project on one axis and all possible types or causes of risk on the other axis.
Cells are then marked according to whether a particular risk applies to a project stage.
Usefulness of a risk matrix
- Useful in risk-identification and analysis stage of evaluation
- Reminds us to consider particular risks
- Convenient categorisation for risks
4 Parts to the Actuarial control cycle
- The general economic and commercial environment
- Specifying the problem
- Developing the solution
- Monitoring the experience
- Professionalism
Risk a insurer may face when siding with independent intermediaries
- Increased risk of anti-selection
Why would an insurer lose market share
- Uncompetitive premiums
- Uneffective marketing
- Lower commissions
- Inefficient administration
- Inefficient claim payments
- Overly strict underwriting
- Loss of reputation