Acronyms Flashcards

1
Q

Contract design stakeholders

116

A

ALPACAS

Actuaries
Lawyers
Providers of benefits
Accountants
Customers
Administrator
Shareholders

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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
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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)
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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)
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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16
Q

Types of actuarial advice

A

FIR

  • Factual
  • Indicative
  • Recommendation
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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
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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
Q

General reasons for holding cash

A

POURS

  • Protect monetary values
  • Opportunities (to take advantage of)
  • Uncertain liabilities
  • Recently received cashflows
  • Short-term liabilities
26
Q

When information from a benefit scheme should be disclosed

A

PRICE

  • Payment commencement
  • Request
  • Intervals
  • Combination
  • Entry
27
Q

Problems with industry data

A

QUERIED

  • Quantity and credibility
  • Up-to-date?
  • Errors
  • Relevance (heterogeneity)
  • Incomplete
  • Exceptions
  • Detail and format
28
Q

Why financial providers need capital

A

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
Q

Reasons for using reinsurance

A

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
Q

Reasons for underwriting

A

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
Q

Benefits of a good risk management system

A

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
Q

Model design: Operational issues

A

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
Q

Info to disclose to benefit scheme members

A

SCRIBE

  • Strategy for investment
  • Contribution obligations
  • Risks involved
  • Insolvency entitlement
  • Benefit entitlements
  • Expense charges
34
Q

Functions of a regulator

A

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
Q

Ways of valuing assets

A

SHAM FADS

  • Smoothed market value
  • Historic book value
  • Adjusted book value
  • Market value
  • Fair value
  • Arbitrage value
  • Discounted cashflow
  • Stochastic modelling
36
Q

Reasons why disclosure is important

A

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
Q

Factors affecting investment strategy

A

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
Q

Types of selection

A

STATIC

  • Spurious
  • Time
  • Adverse
  • Temporary
  • Initial
  • Class
39
Q

Investment and risk characteristics of assets

A

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
Q

Regulatory influences on assets held

A

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
Q

Sources of data

A

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
Q

Characteristics of investors

A

TRAITOR

  • Tax position
  • Regulation on investor
  • Assets already held
  • Income/cashflow requirements
  • Tastes (liabilities, education)
  • Other assets
  • Risk appetites
43
Q

Factors to consider for discontinuance terms

A
44
Q

Factors to consider when setting assumptions

A

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