Acronyms Flashcards
1
Q
Contract design stakeholders
116
A
ALPACAS
Actuaries
Lawyers
Providers of benefits
Accountants
Customers
Administrator
Shareholders
2
Q
Reasons for calculating provisions
A
BAD MEDICS
- Benefit improvements for a benefit scheme
- Accounts and reports (published and internal)
- Discontinuance/surrender benefits
- Mergers and acquisitions
- Excess of assets over liabilities and so whether discretionary benefits can be awarded
- Disclosure of information for beneficiaries
- Investment strategy
- Contribution/premium setting
- Supervisory solvency reports
3
Q
Contract design factors
A
AMPLE DIRECT FACTORS
- Administration systems
- Marketability
-Profitability - Level and form of benefits
- Early leaver benefits
- Discretionary benefits
- Interest and needs of customers
- Risk appetite of the parties involved
- Expenses vs charges
- Competition
- Terms and conditions of contract
- Financing (capital requirements)
- Accounting implications
- Consistency with other products
- Timing and contributions of premiums
- Options and guarantees
- Regulatory requirements
- Subsidies (cross)
4
Q
Considerations when using past data to set assumptions
A
BEST ARCHER
- Balance of homogenous groups underlying the data may have changed
- Economic situation may have changed
- Social conditions may have changed
- Trends over time, e.g., medical, demographic
- Abnormal fluctuations
- Random fluctuations
- Changes in regulation
- Heterogeneity within the group to which the assumptions will apply
- Errors in the data
- Recording differences (e.g. in categorization of smoker)
5
Q
Characteristics of a prime property
A
CALL ST
- Comparable properties for rent review
- Age, condition and flexibility of use
- Location
- Lease structure
- Size
- Tenant quality
6
Q
Common aims of accounting standards (for benefit scheme disclosures)
A
CARD
- Consistency in accounting treatment from year to year
- Avoiding distortions resulting from contribution fluctuations
- Recognising the realistic costs of accruing benefits
- Disclosure of appropriate information
7
Q
Practical problems with overseas investment
A
CATERPILLAR
- Custodian needed
- Additional admin required
- Time delays
- Expenses incurred/expertise needed
- Different/poor regulation
- Political instability
- Information harder to obtain (and less of it)
- Language difficulties
- Liquidity problems
- Accounting differences
- Restrictions on foreign ownership/repatriation problems
8
Q
Main difficulties of overseas investment
A
MTV
- Matching domestic liabilities
- Taxation (may not be able to recover withholding taxes paid)
- Volatility of currency
9
Q
Additional reports accompanying accounts
A
CIRCUS
- Chairperson’s/CEO’s statements
- Investment report
- Remuneration report
- Corporate governance report
- Uncertainty (risk) report
- Strategic report
10
Q
Expenses incurred by product provider
A
COST RAID
- Commission
- Overheads
- Sales/advertising
- Terminal, e.g., paying benefits
- Renewal administration, e.g., collecting premiums/contributions
- Asset management
- Initial administration, e.g., setting-up costs
- Design of the contract
11
Q
External environment factors
A
CREATE GRAND LISTS
- Corporate structure
- Regulation and legislation
- Environmental issues and climate change
- Accounting standards
- Tax
- Economic outlook (e.g. interest rates, inflation, growth)
- Governance
- Risk management requirements
- Adequacy of capital and solvency
- New business environment
- Demographic trends
- Lifestyle considerations
- International practice
- State benefits
- Technology
- Social and cultural trends
12
Q
Inappropriate advice
A
CRIMES
- Complicated products
- Rubbish (Incompetent) advisor
- Integrity of advisor lacking, e.g., due to sales-related payments
- Model or parameter errors
- Errors in data relating to beneficiaries
- State-encouraged but inappropriate actions
13
Q
Benefit scheme info to disclose in accounts
A
DIM CLAIMS
- Directors benefit costs
- Investment return over year
- Membership improvements
- Change in surplus/deficit over year
- Liabilities accruing over year
- Assumptions
- Increase in past service liabilities
- Method
- Surplus/deficit
14
Q
Reasons for analysing surplus
A
DIVERGENCE
- Divergence of actual vs expected
- Information to management and for accounts
- Variance calculations
- Experience monitoring to feedback into ACC
- Reconcile values for successive years
- Group into one-off or recurring sources of surplus
- Executive remuneration schemes (data for)
- New business strain (shows effect of)
- Check on valuation assumptions and calculations
- Extra check on valuation data
15
Q
Considerations in assessing different models
A
FENCED
- Fit for purpose
- Expertise available in house
- Need for flexibility
- Cost of each option
- Expected number of times used
- Desired accuracy
16
Q
Types of actuarial advice
A
FIR
- Factual
- Indicative
- Recommendation
17
Q
Evaluation of risk mitigation options
A
FIRM
- Feasibility and cost
- Impact on frequency/severity/expected value
- Resulting secondary risks
- Mitigation required in response to secondary risk
18
Q
Importance of risk reporting
A
FRAUD CRIME
- Financing (appropriate price, reserves, capital requirements)
- Rating agencies
- Attractiveness to investors
- Understand better (risks and their financial impact)
- Determine appropriate control systems
- Changes over time (analyse)
- Regulators
- Interactions
- Monitoring effectiveness of risk controls
- Emerging risk identification
19
Q
Economic situations in which cash is attractive
A
GRID
- General economic uncertainty
- Recession expected
- Interest rates expected to rise
- Depreciation of domestic currency expected
20
Q
Aims of a reggulator
A
GRIP
- Give confidence in the system
- Reduce financial crime
- Inefficiencies in the market corrected (and efficient orderly markets promoted)
- Protect consumers
21
Q
Economic factors
A
IS FIERCE
- Inflation
- Short-term interest rates
- Fiscal deficit
- Imports/exports
- Employment rate
- Returns on alternative investments
- Currency
- Economic growth
22
Q
Additional criteria for a risk to be insurable
A
MUD PIS
- Moral hazard eliminated as far as possible
- Ultimate limit on liability undertaken
- Data exists with which to price risk
- Pooling a large number of similar risks
- Independent risk events
- Small probability of occurance
23
Q
Risk responses
A
PIRATE
- Partially transfer
- Ignore
- Reduce
- Accept (retain all)
- Transfer
- Evade (avoid)
24
Q
Identification of causes of risk in projects
A
PNEFCPB
- Political risk
- Natural risk
- Economic risk
- Financial risk
- Crime
- Project risk
- Business risk
25
General reasons for holding cash
POURS
- Protect monetary values
- Opportunities (to take advantage of)
- Uncertain liabilities
- Recently received cashflows
- Short-term liabilities
26
When information from a benefit scheme should be disclosed
PRICE
- Payment commencement
- Request
- Intervals
- Combination
- Entry
27
Problems with industry data
QUERIED
- Quantity and credibility
- Up-to-date?
- Errors
- Relevance (heterogeneity)
- Incomplete
- Exceptions
- Detail and format
28
Why financial providers need capital
REG CUSHION
- Regulatory requirement to demonstrate solvency
- Expenses of launching a new product/starting a new operation
- Guarantees can be offered
- Cashflow timing management
- Unexpected events cushion, e.g., adverse experience
- Smooth profits
- Help demonstrate financial strength
- Investment freedom to mismatch in pursuit of higher returns
- Opportunities, e.g., mergers and acquisitions
- New business strain financing
29
Reasons for using reinsurance
SAD LIFE
- Smooth results
- Avoid large losses
- Diversification (investment mismatching)
- Limit exposure to risk (single event, accumulations)
- Increased capacity to accept risk
- Financial assistance
- Expertise
30
Reasons for underwriting
SAFARI
- Suitable approach (increased premiums/reduced sum assured) and special terms
- Avoid anti-selection
- Financial underwriting against over-insurance
- Actual experience in line with expected
- Risk classification (risks rated fairly)
- Identify substandard health risks
31
Benefits of a good risk management system
SAMOSAS
- Stability/quality of business improved
- Avoid surprises
- Management of capital improved
- Opportunities can be exploited for profit
- Synergies identified
- Arbitrage identified
- Stakeholders given confidence
32
Model design: Operational issues
SCARCER FILES
- Simple but retains key features
- Clear results
- Adequately documented
- Range of implementation methods
- Communicable workings and outputs
- Easy to understand
- Refinable and developable
- Frequency of cashflows (balance accuracy vs practicality)
- Independent verification of outputs
- Length of run not too long
- Expenses not too high
- Sensible joint behavior of variables
33
Info to disclose to benefit scheme members
SCRIBE
- Strategy for investment
- Contribution obligations
- Risks involved
- Insolvency entitlement
- Benefit entitlements
- Expense charges
34
Functions of a regulator
SERVICE
- Setting sanctions
- Enforcing regulations
- Reviewing and influencing government policy
- Vetting and registering firms and individuals
- Investigating breaches
- Checking management and conduct of providers
- Educating consumers and the public
35
Ways of valuing assets
SHAM FADS
- Smoothed market value
- Historic book value
- Adjusted book value
- Market value
- Fair value
- Arbitrage value
- Discounted cashflow
- Stochastic modelling
36
Reasons why disclosure is important
SIMMERS
- Sponsor is aware of financial significance of benefits
- Informed decisions can be made
- Mis-selling is avoided
- Manages the expectations of members
- Encourages take up
- Regulatory requirement
- Security of scheme improved as sponsor/trustees are made more accountable
37
Factors affecting investment strategy
SOUNDER TRACTORS
- Size of the assets (absolute/relative)
- Objectives
- Uncertainty of the liabilities
- Nature of the liabilities
- Diversification
- Existing portfolio
- Return (expected long-term)
- Tax treatment of the assets/investor
- Restrictions - statutory/legal/voluntary
- Accrual of liabilities in the future
- Currency of the existing liabilities
- Term of the existing liabilities
- Other funds' strategies (competition)
- Risk appetite
- Solvency and accounting requirements
38
Types of selection
STATIC
- Spurious
- Time
- Adverse
- Temporary
- Initial
- Class
39
Investment and risk characteristics of assets
SYSTEM T
- Security (default and other risks)
- Yield (real or nominal, running yield, expected return, compare with other assets)
- Spread (volatility of market values, diversification)
- Term
- Expenses or exchange rate
- Marketability
- Tax
40
Regulatory influences on assets held
TECH SCAM
- Types of assets that a provider can invest in
- Extent to which mismatching is allowed
- Currency matching requirement
- Hold certain assets, e.g., government bonds
- Single counterparty maximum exposure
- Custodian of assets
- Amount of any one asset used to demonstrate solvency may be restricted
- Mismatch reserve
41
Sources of data
TRAINERS
- Tables (e.g. actuarial mortality tables)
- Reinsurers
- Abroad (data from overseas contracts)
- Industry data
- National statistics
- Experience investigations on existing contracts
- Regulatory reports and company accounts
- Similar contracts
42
Characteristics of investors
TRAITOR
- Tax position
- Regulation on investor
- Assets already held
- Income/cashflow requirements
- Tastes (liabilities, education)
- Other assets
- Risk appetites
43
Factors to consider for discontinuance terms
44
Factors to consider when setting assumptions
LUNCH
- Legislation/regulation
- Use of the assumptions (to be conservative or optimistic)
- Needs of the client
- Consistency between assumptions
- How financially significant is/are the assumptions
