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1
Q

1

MCT 1: OVERVIEW & GEN REQ

(1.1) intro:Define ‘target capital required’ (give the statistical defn)

A

1

MCT 1: OVERVIEW & GEN REQ

(1. 1) intro:Define ‘target capital required’ (give the statistical defn)
* Capital level corresponding to CTE(99%) on the loss distribution over 1-yr time horizon (CTE = Conditional Tail Expectation)

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2
Q

2

MCT 1: OVERVIEW & GEN REQ

(1.1) intro:Are insurers required to meet capital requirements at all times

A

2

MCT 1: OVERVIEW & GEN REQ

(1. 1) intro:Are insurers required to meet capital requirements at all times
* YES!

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3
Q

3

MCT 1: OVERVIEW & GEN REQ

(1.1) intro:Describe scope of consolidation for MCT

A

3

MCT 1: OVERVIEW & GEN REQ

(1.1) intro:Describe scope of consolidation for MCT

  1. MCT ratio is calculated on consolidated basis
    • Includes: any subsidiary parent could operate directly (Ex: other P&C insurer)
    • Excludes: life insurers
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4
Q

4

MCT 1: OVERVIEW & GEN REQ

(1.1) intro:What is an easy proxy for CapAv (Capital Available) that appears on the B/S (Balance Sheet)

A

4

MCT 1: OVERVIEW & GEN REQ

(1. 1) intro:What is an easy proxy for CapAv (Capital Available) that appears on the B/S (Balance Sheet)
1. B/S equity

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5
Q

5

MCT 1: OVERVIEW & GEN REQ

Qz-1 defns:Define insurance risk

risk of loss..clms..

A

5

MCT 1: OVERVIEW & GEN REQ

Qz-1 defns:Define insurance risk

risk of loss..clms..

  • Risk of loss FROM the potential for claims (from policyholders & beneficiaries)
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6
Q

6

MCT 1: OVERVIEW & GEN REQ

Qz-1 defns:Define market risk

risk of loss..chgs..

A

6

MCT 1: OVERVIEW & GEN REQ

Qz-1 defns:Define market risk

risk of loss..chgs..

  • Risk of loss FROM changes in prices in various markets
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7
Q

7

MCT 1: OVERVIEW & GEN REQ

Qz-1 defns:Define credit risk

risk of loss..counter-parties..

A

7

MCT 1: OVERVIEW & GEN REQ

Qz-1 defns:Define credit risk

risk of loss..counter-parties..

  • Risk of loss FROM counterparty’s potential INABILITY or UNWILLINGNESS to fully meet contractual obligations due to the insurer
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8
Q

8
E (2016.Fall 18a.) 0.500 pts

MCT 1: OVERVIEW & GEN REQ

Qz-1 defns:Define operational risk

risk of loss..processes..

A

8
E (2016.Fall 18a.) 0.500 pts

MCT 1: OVERVIEW & GEN REQ

Qz-1 defns:Define operational risk

risk of loss..processes..

  • Risk of loss FROM inadequate or failed internal processes, people, systems or from external events
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9
Q

10
E (2015.Fall 19.) 2.000 pts

MCT 2: CAPITAL AVAILABLE

Qz-2 (2.1) CapAv:4 considerations in defining MCT CapAv (Capital Available)

MCT-APAS

A

10
E (2015.Fall 19.) 2.000 pts

MCT 2: CAPITAL AVAILABLE

Qz-2 (2.1) CapAv:4 considerations in defining MCT CapAv (Capital Available)

MCT-APAS

  1. AVAILABILITY: is the capital element (fully paid) and (available to absorb losses)
  2. PERMANENCE: until when is a capital element available
  3. ABSENCE: ask whether a capital element has an absence of (encumbrances) & (mandatory servicing costs)
  4. SUBORDINATION: is the capital element (subordinated to rights of policy holders and creditors) in (an insolvency or winding-up)
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10
Q

11

MCT 2: CAPITAL AVAILABLE

(2.1) CapAv:What are the 3 broad components of capital available (3)

A

11

MCT 2: CAPITAL AVAILABLE

(2.1) CapAv:What are the 3 broad components of capital available (3)

  1. Category A (common equity)
  2. Category B
  3. Category C
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11
Q

12

MCT 2: CAPITAL AVAILABLE

(2.2) CapCompLims:When is excess category B & C capital included in capital available (2)

A

12

MCT 2: CAPITAL AVAILABLE

(2.2) CapCompLims:When is excess category B & C capital included in capital available (2)

  1. (w/ OSFI approval) & (plan to return to compliance ASAP)
  2. Must be due to event(s) beyond insurer’s control
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12
Q

16
E (2017.Spring 24b.i) 0.500 pts

MCT 2: CAPITAL AVAILABLE

Qz-2 supp:Describe impact of unregistered reinsurance on MCT capital available

A

16
E (2017.Spring 24b.i) 0.500 pts

MCT 2: CAPITAL AVAILABLE

Qz-2 supp:Describe impact of unregistered reinsurance on MCT capital available

  • If unregistered reinsurance goes UP then CapAv goes DOWN
  • Reduction = max(0, D) WHERE D = (UEP + O/S + ReIns Recv) - (ReIns Pay + NOD + LOC) SUMMED over all reinsurers separately
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13
Q

17

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.2) margins:On what basis should claims and premium be put before calculating capital required for insurance risk

A

17

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.2) margins:On what basis should claims and premium be put before calculating capital required for insurance risk

  • The data should be NET of (reinsurance, salv/sub, SIRs) and EXCLUDE (PfADs)
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14
Q

18

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.3) ReIns:What is the $-limit on LOC (Letters of Credit) for obtaining capital credit against unregistered reinsurance

A

18

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.3) ReIns:What is the $-limit on LOC (Letters of Credit) for obtaining capital credit against unregistered reinsurance

  • LOC limit = 30% x (UEP ceded + O/S recoverable)
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15
Q

25

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:Define ‘earthquake premium reserve’ (EPR)

A

25

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:Define ‘earthquake premium reserve’ (EPR)

  • Voluntary accumulation of earthquake premiums (must not exceed PML500)
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16
Q

26

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:If earthquake premium is implicit in total premium, what must the insurer demonstrate

reasonableness of allocation..

A

26

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:If earthquake premium is implicit in total premium, what must the insurer demonstrate

reasonableness of allocation..

  1. Demonstrate reasonableness of premium allocation to earthquake coverage
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17
Q

27

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:When can EPR be reduced (2)

A

27

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:When can EPR be reduced (2)

  1. When there is material decrease in eqk-X
  2. To establish a (claims, LAE) provision post-event
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18
Q

28

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:Is EPR included in reserve amounts on B/S

A

28

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:Is EPR included in reserve amounts on B/S

  • Yes
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19
Q

29

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

(4.5) Cats:What is the formula for MCT capital required for nuclear reserves

A

29

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

(4. 5) Cats:What is the formula for MCT capital required for nuclear reserves
* Nuclear reserve = NWP x 1.25 (may reverse after 20 years UNLESS there is credible data not to do so)

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20
Q

30
E (2019.Spring 18b.) 1.000 pts

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:Explain the impact on MCT components of a decrease in ER (Earthquake Reserves)

A

30
E (2019.Spring 18b.) 1.000 pts

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:Explain the impact on MCT components of a decrease in ER (Earthquake Reserves)

  • Need only 4 items for 1.0 pts:
  1. Capital available doesn’t change
  2. Capital required for insurance risk decreases
  3. Capital required for market risk doesn’t change
  4. Capital required for credit risk depends on use of unregistered reinsurance for earthquakes
  5. Capital required for operational risk decreases (because insurance risk decreases)
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21
Q

31
E (2018.Fall 26d.) 0.250 pts

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:True or false: MCT takes into account flood risk

A

31
E (2018.Fall 26d.) 0.250 pts

MCT 4: CAPITAL REQUIRED: INSURANCE RISK

Qz-3 (4.5) Cats:True or false: MCT takes into account flood risk

  • It could be both true & false:
    1. Flood risk would be part of general insurance risk (if it were sold)
    2. But flood is not currently given special consideration like earthquake
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22
Q

34

MCT 6:CAPITAL REQUIRED: CREDIT RISK

Qz-5 (6.2) Off B/S Items:What are some examples of off-B/S sheet exposures (4)

A

34

MCT 6:CAPITAL REQUIRED: CREDIT RISK

Qz-5 (6.2) Off B/S Items:What are some examples of off-B/S sheet exposures (4)

  1. Structured settlements
  2. NOD (Non-Owned Deposits)
  3. LOC (Letters of Credit)
  4. Derivatives
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23
Q

35

MCT 6:CAPITAL REQUIRED: CREDIT RISK

(6.2) Off B/S Items:General method for CapReq(off-B/S): + problem

CRX x RF

A

35

MCT 6:CAPITAL REQUIRED: CREDIT RISK

(6.2) Off B/S Items:General method for CapReq(off-B/S): + problem

CRX x RF

  • CapReq = (CrdRsk exposure x RskFctr) | Problem: face amount of off-B/S exposure (may not reflect) true CrdRsk exposure
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24
Q

36

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 general:Is legal risk included in operationl risk? (yes/no)

A

36

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 general:Is legal risk included in operationl risk? (yes/no)

  • Yes, legal risk is included as part of operational risk
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25
Q

37

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 general:List 2 types of risk that are EXCLUDED from MCT operational risk (2)

A

37

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 general:List 2 types of risk that are EXCLUDED from MCT operational risk (2)

  1. Strategic risk
  2. Reputation risk
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26
Q

38

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 general:What is the purpose of the cap on operational risk of 30% x CR(0), where CR(0) = Sum (ins, mkt, crd) risk

A

38

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 general:What is the purpose of the cap on operational risk of 30% x CR(0), where CR(0) = Sum (ins, mkt, crd) risk

  • To dampen operational risk for high-volume, low-complexity businesses that have high levels of reinsurance
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27
Q

39

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 general:What is rapid premium growth linked to (3)

A

39

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 general:What is rapid premium growth linked to (3)

  1. Mergers
  2. New LOBs
  3. Changes to products or U/W criteria
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28
Q

40
E (2017.Spring 24b.iii) 0.500 pts

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 supp:Impact of unregistered reinsurance on MCT OpnRsk

A

40
E (2017.Spring 24b.iii) 0.500 pts

MCT 7:CAPITAL REQUIRED: OPERATIONAL RISK

Qz-6 supp:Impact of unregistered reinsurance on MCT OpnRsk

  • When unregistered reinsurance goes UP –> CapReq(OpnRsk) goes UP
    • OpnRsk DEPENDS on InsRsk & CrdRsk
    • InsRsk goes UP because unregistered reinsurance is one of its components
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29
Q

42
E (2016.Fall 18c.) 0.500 pts

MCT 8: DIVERSIFICATION CREDIT

Qz-7 (8.1) DivsCrd:Define ‘diversification credit’

A

42
E (2016.Fall 18c.) 0.500 pts

MCT 8: DIVERSIFICATION CREDIT

Qz-7 (8.1) DivsCrd:Define ‘diversification credit’

  • A reduction to capital required RECOGNIZING that not all risk categories are likely to suffer maximum loss simultaneously
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30
Q

43
E (2018.Fall 26b.) 0.250 pts

MCT 8: DIVERSIFICATION CREDIT

Qz-7 (8.1) DivsCrd:Does the diversification credit consider correlation between & within all risk components

A

43
E (2018.Fall 26b.) 0.250 pts

MCT 8: DIVERSIFICATION CREDIT

Qz-7 (8.1) DivsCrd:Does the diversification credit consider correlation between & within all risk components

  • No:
    1. Credit & market risk are summed to get asset risk
    2. Then the diversification credit considers the correlation between asset & insurance risk
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31
Q

55
E (2017.Spring 19b.) 0.500 pts

MCT SUPP: OTHER EXAM PROBLEMS

supp:Describe a non-modeled approach to calculating eqk reserves

A

55
E (2017.Spring 19b.) 0.500 pts

MCT SUPP: OTHER EXAM PROBLEMS

supp:Describe a non-modeled approach to calculating eqk reserves

  • Use the ‘standard’ approach:
    1. Calc ERX = [max(EastCan.PTIV, WestCan.PTIV) - deduc], where PTIV = Property Total Insured Value
    2. THEN calc ER (Earthquake Reserve) the same way as in the modeled approach
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32
Q

56
E (2015.Fall 18a.) 0.500 pts

MCT SUPP: OTHER EXAM PROBLEMS

Qz-8 supp:Purpose of establishing a supervisory target MCT (3)

A

56
E (2015.Fall 18a.) 0.500 pts

MCT SUPP: OTHER EXAM PROBLEMS

Qz-8 supp:Purpose of establishing a supervisory target MCT (3)

  1. Early warning for management
  2. Threshold for OSFI intervention
  3. Accounts for (all risks in MCT ratio) + (non-modeled risks, off-B/S risks) + MARGIN
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33
Q

69

CIA.MfAD 01-04: INTRODUCTION

Qz-1 intro:What is the purpose of MfADs (Margins for Adverse Deviations)

to reflect..

A

69

CIA.MfAD 01-04: INTRODUCTION

Qz-1 intro:What is the purpose of MfADs (Margins for Adverse Deviations)

to reflect..

  • To reflect a degree of uncertainty inherent in an actuarial best estimate
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34
Q

70

CIA.MfAD 01-04: INTRODUCTION

Qz-1 intro:What are some broad methods for calculating MfADs (2)

deterministic, stochastic

A

70

CIA.MfAD 01-04: INTRODUCTION

Qz-1 intro:What are some broad methods for calculating MfADs (2)

deterministic, stochastic

  1. Deterministic: select percentages directly based on knowledge of the situation
  2. Stochastic: use quantile methods based on a statistical analysis
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35
Q

71

CIA.MfAD 01-04: INTRODUCTION

Qz-1 defns:What is the technical defn of MfAD (Margin for Adverse Deviation)

difference between.. assumption..

A

71

CIA.MfAD 01-04: INTRODUCTION

Qz-1 defns:What is the technical defn of MfAD (Margin for Adverse Deviation)

difference between.. assumption..

  • Difference between (ASSUMPTION for actual calculation) and (ASSUMPTION for best estimate calculation)
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36
Q

72

CIA.MfAD 01-04: INTRODUCTION

Qz-1 defns:What is the technical defn of PfAD (Provision for Adverse Deviation)

difference between.. result..

A

72

CIA.MfAD 01-04: INTRODUCTION

Qz-1 defns:What is the technical defn of PfAD (Provision for Adverse Deviation)

difference between.. result..

  • Difference between (RESULT of actual calculation) and (RESULT of best estimate calculation)
    • The best estimate might be the median of your loss distribution
    • The actual calculation would be more conservative, maybe the 90th percentile, the difference being the PfAD amounts
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37
Q

73

CIA.MfAD 01-04: INTRODUCTION

Qz-1 defns:Categories of MfADs (3)

A

73

CIA.MfAD 01-04: INTRODUCTION

Qz-1 defns:Categories of MfADs (3)

  1. Investment return rates
  2. Development on claims
  3. Recovery on losses ceded to reinsurer
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38
Q

74
E (2019.Spring 24b.) 1.000 pts

CIA.MfAD 01-04: INTRODUCTION

Qz-1 good RskMarg traits:According to IAIS, when should a risk margin generally be HIGHER/lower (4,1)

information, freq/sev, contract term, loss distribution

A

74
E (2019.Spring 24b.) 1.000 pts

CIA.MfAD 01-04: INTRODUCTION

Qz-1 good RskMarg traits:According to IAIS, when should a risk margin generally be HIGHER/lower (4,1)

information, freq/sev, contract term, loss distribution

  • Risk margin should be HIGHER:
    1. When less is known about the estimate
    2. For low frequency / high severity LOBs
    3. For longer contract terms
    4. When there is a wide probability distribution for the losses
  • Risk margin should be LOWER:
    1. With emerging experience
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39
Q

76
E (2017.Fall 27error2.) 0.750 pts

CIA.MfAD 01-04: INTRODUCTION

calc:What is the formula for calculating PfAD for reinsurance ceded

A

76
E (2017.Fall 27error2.) 0.750 pts

CIA.MfAD 01-04: INTRODUCTION

calc: What is the formula for calculating PfAD for reinsurance ceded
* PfAD(re) = MfAD(re) x PV(ceded unpaid losses)

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40
Q

77
E (2019.Spring 24a.i,ii) 0.500 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 intro:Deterministic (lower, UPPER) % limits on MfADs (3)

A

77
E (2019.Spring 24a.i,ii) 0.500 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 intro:Deterministic (lower, UPPER) % limits on MfADs (3)

  1. Investment return rate ( 25 bps , 200 bps )
  2. Claims development ( 2.5% , 20% )
  3. Reinsurance recovery ( 0% , 15% )
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41
Q

78
E (2016.Spring 29b.i) 0.500 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Identify CATEGORIES of considerations for selecting MfAD(clms) (3)

ODL

A

78
E (2016.Spring 29b.i) 0.500 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Identify CATEGORIES of considerations for selecting MfAD(clms) (3)

ODL

  1. Operations (U/W, claims management, other)
  2. Data (on which estimate is based)
  3. LOB
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42
Q

79
E (2016.Spring 29b.i) 0.500 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Identify OPERATIONAL considerations in selecting MfAD(clms) -> (when to pick HIGH/low)

low(SSC), high(op Changes, Turnover, Lack of Guidelines)

A

79
E (2016.Spring 29b.i) 0.500 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Identify OPERATIONAL considerations in selecting MfAD(clms) -> (when to pick HIGH/low)

low(SSC), high(op Changes, Turnover, Lack of Guidelines)

  • Pick HIGH when there are (operational changes, employee turnover, Lack of Guidelines, inadequate staffing)
  • Pick LOW when operations are (Stable, Strong, Consistent)
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43
Q

80

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Identify DATA considerations in selecting MfAD(clms) -> (when to pick low)

low(SCH)

A

80

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Identify DATA considerations in selecting MfAD(clms) -> (when to pick low)

low(SCH)

  • Pick LOW when data is
    1. Stable
    2. Credible
    3. Homogeneous
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44
Q

81

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Identify LOB considerations in selecting MfAD(clms) -> (when to pick low)

S

A

81

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Identify LOB considerations in selecting MfAD(clms) -> (when to pick low)

S

  1. Pick LOW when LOBs are “stable”
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45
Q

82

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Reasons to select highest MfAD(clms) margin of 20% (3)

tort.new.(+retention)

A

82

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Reasons to select highest MfAD(clms) margin of 20% (3)

tort.new.(+retention)

  1. For significant changes: (tort reform, legal challenges)
  2. For a new LOB in new province with limited data
  3. For an increase in retentions with limited data for assessing effect
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46
Q

83
E (2019.Spring 24a.iii) 0.250 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Reasons to select MfAD(clms) higher than 20% (3)

cons3

A

83
E (2019.Spring 24a.iii) 0.250 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Reasons to select MfAD(clms) higher than 20% (3)

cons3

  1. If there is unusually high uncertainty
  2. If PfAD is already very low because best estimate of claims liability is very low
  3. If a stochastic analysis indicates variability not identified using a deterministic analysis
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47
Q

84

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Reasons to select lowest MfAD(clms) margin of 2.5% (3)

comm.StrucSett.stoploss

A

84

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(clms):Reasons to select lowest MfAD(clms) margin of 2.5% (3)

comm.StrucSett.stoploss

  1. LOB commuted to reinsurer and is in runoff
  2. LOB has pre-set payments (Ex: structured settlement)
  3. Insurer has stop-loss coverage reserved at stop-loss limit
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48
Q

86
E (2016.Spring 29b.ii) 1.000 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(re):Identify considerations in selecting of MfAD(re) (3)

LR.unreg.FinCond

A

86
E (2016.Spring 29b.ii) 1.000 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(re):Identify considerations in selecting of MfAD(re) (3)

LR.unreg.FinCond

  1. Consider ceded Loss Ratio (if high: pick MfAD high)
  2. Consider proportion of unregistered reinsurance (if high: pick MfAD high)
  3. Consider financial condition of reinsurer (if poor: pick MfAD high)
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49
Q

89
E (2017.Spring 25c.) 0.500 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(inv):Identify considerations in selecting MfAD(inv) (3)

CFmch.P-Pat.AssRsk

A

89
E (2017.Spring 25c.) 0.500 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(inv):Identify considerations in selecting MfAD(inv) (3)

CFmch.P-Pat.AssRsk

  1. MATCHING of cash flows from assets & liabilities (if unmatched: pick MfAD high)
  2. ERROR in estimating payment patterns (if uncertain: pick MfAD high)
  3. ASSET risk (credit/default & liquidity) (if high risk: pick MfAD high)
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50
Q

90
E (2019.Spring 24a.iv) 0.250 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(inv):When may MfAD(Inv) < 25 bps

A

90
E (2019.Spring 24a.iv) 0.250 pts

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(inv):When may MfAD(Inv) < 25 bps

  • When the best estimate of the discount rate (based on insurer’s assets) is already below 25 bps
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51
Q

92

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(inv):Formula-based deterministic approaches (2)

A

92

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

Qz-2 MfAD(inv):Formula-based deterministic approaches (2)

  1. Weighted formula
  2. Explicit quantification
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52
Q

93

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

MfAD(inv):Weighted formula method

A

93

CIA.MfAD 05: EXPLICIT ASSMPS - DETERMINISTIC MfADs

MfAD(inv):Weighted formula method

  1. MfAD(inv) = iPM - iAM
  2. iAM = min [iPM, iRFM x (1-k)]
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53
Q

97

CIA.MfAD 11: Documentation & Reporting

Qz-4 docs:What should be disclosed in MfAD docs

A

97

CIA.MfAD 11: Documentation & Reporting

Qz-4 docs:What should be disclosed in MfAD docs

  1. For explicit assumptions: how margins were selected
  2. For stochastic analysis: describe components modeled as random variables, with their distributions & parameters
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54
Q

98

CIA.MfAD 11: Documentation & Reporting

Qz-4 docs:Rule of thumb for level of detail to include in MfAD docs (i)

A

98

CIA.MfAD 11: Documentation & Reporting

Qz-4 docs:Rule of thumb for level of detail to include in MfAD docs (i)

  1. Strike balance between (too little, too much)
  2. Considering what (qualitative, quantitative) info best serves user’s (understanding, decision-making)
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55
Q

99

CIA.MfAD 11: Documentation & Reporting

Qz-4 docs:Rule of thumb for level of detail to include in MfAD docs (ii)

SIC

A

99

CIA.MfAD 11: Documentation & Reporting

Qz-4 docs:Rule of thumb for level of detail to include in MfAD docs (ii)

SIC

  1. Sophistication of user
  2. Importance of concept to user
  3. Complexity of concept
  • NOTE: cross-reference with materiality paper
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56
Q

100
E (2018.Fall 26a.) 0.250 pts

CIA.MfAD SUPP:

Qz-5 supp:In general, would MfADs be the same for claim & premium liabilities

A

100
E (2018.Fall 26a.) 0.250 pts

CIA.MfAD SUPP:

Qz-5 supp:In general, would MfADs be the same for claim & premium liabilities

  • No, claim & premium liabilities have different risk profiles
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57
Q

104
E (2015.Fall 26b.) 0.250 pts

CIA.MfAD SUPP:

Qz-5 supp:What is the difference between PV & APV (Present Value & Actuarial Present Value)

A

104
E (2015.Fall 26b.) 0.250 pts

CIA.MfAD SUPP:

Qz-5 supp:What is the difference between PV & APV (Present Value & Actuarial Present Value)

  1. PV: accounts only for the time value of money
  2. APV: accounts for the time value of money AND includes a risk margin for (investment return, claims development, reinsurance recovery)
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58
Q

105
E (2016.Fall 24a.) 0.500 pts

CIA.MfAD SUPP:

Qz-5 supp:Is APV always smaller than the undiscounted liabilities

A

105
E (2016.Fall 24a.) 0.500 pts

CIA.MfAD SUPP:

Qz-5 supp:Is APV always smaller than the undiscounted liabilities

  • NO: it depends on the balance between the discount factor (which decreases APV) & the MfADs (which increase APV)
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59
Q

109
E (2015.Spring 19c.) 0.500 pts

CIA.MfAD SUPP:

supp:In general, what are possible choices for selection of ceded discount rate

A

109
E (2015.Spring 19c.) 0.500 pts

CIA.MfAD SUPP:

supp:In general, what are possible choices for selection of ceded discount rate

  1. Risk-free rate
  2. Rate used by reinsurer to discount the same liabilities
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60
Q

113
E (2014.Fall 21a.) 0.500 pts

CIA.MfAD SUPP:

supp:Identify some risks not explicit in calculation of policy liabilities or MCT capital required (5)

SRFI.ID

A

113
E (2014.Fall 21a.) 0.500 pts

CIA.MfAD SUPP:

supp:Identify some risks not explicit in calculation of policy liabilities or MCT capital required (5)

SRFI.ID

  1. Strategic
  2. Reputational
  3. Fraud
  4. Innovation
  5. International development
  • NOTE: CAS answer seemed to include several ‘normal’ risks
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61
Q

129
E (2016.Spring 18b.) 0.500 pts

CCIR.ARINSTR: All

Qz-1 general:Define ‘non-deferrable commission’

commissions..relating/varying..hence

A

129
E (2016.Spring 18b.) 0.500 pts

CCIR.ARINSTR: All

Qz-1 general:Define ‘non-deferrable commission’

commissions. .relating/varying..hence
* Commissions not exclusively RELATING TO and VARYING with the acquisition of premium HENCE not recoverable over the term of the unexpired policy

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62
Q

130
E (2013.Fall 21b.) 0.250 pts

CCIR.ARINSTR: All

Qz-1 general:Ways of accounting for time value of money in calculating excess (deficiency) ratio

A

130
E (2013.Fall 21b.) 0.250 pts

CCIR.ARINSTR: All

Qz-1 general:Ways of accounting for time value of money in calculating excess (deficiency) ratio

  1. Explicitly calculate investment income and add to excess amount
  2. Discount the undiscounted amounts (back to the SAME POINT IN TIME) to reverse effects of discounting
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63
Q

131
E (2013.Fall 23a.) 0.750 pts

MSA.RATIOS: All

Qz-3 intro:Give examples of company characteristics not captured in MSA ratios (4)

A

131
E (2013.Fall 23a.) 0.750 pts

MSA.RATIOS: All

Qz-3 intro:Give examples of company characteristics not captured in MSA ratios (4)

  1. Subjective analysis of market position
  2. Quality of management
  3. Quality of reinsurance
  4. Prospects for growth & innovation
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64
Q

132
E (2013.Fall 23c.) 0.500 pts

MSA.RATIOS: All

Qz-3 intuition:What does diversification score measure

A

132
E (2013.Fall 23c.) 0.500 pts

MSA.RATIOS: All

Qz-3 intuition:What does diversification score measure

  1. Measures how closely the insurer tracks the overall Canadian market (in terms of geographic & LOB spread)
  2. If diversification score > 65 –> company is highly diversified
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65
Q

133

MSA.RATIOS: All

Qz-3 intuition:Give examples of an insurer with a low/high diversification score

A

133

MSA.RATIOS: All

Qz-3 intuition:Give examples of an insurer with a low/high diversification score

  1. Low: niche insurers
  2. High: national, multi-line writers
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66
Q

156
E (2015.Spring 26c.) 0.500 pts

MSA.RATIOS: All

Qz-3 calc:Compare the MSA ratios: ROE ROR

A

156
E (2015.Spring 26c.) 0.500 pts

MSA.RATIOS: All

Qz-3 calc:Compare the MSA ratios: ROE ROR

  • Just give formulas & intuition:
    1. ROE: return to SHs per unit of capital
    2. ROR: income relative to revenue-generating capacity
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67
Q

162
E (2018.Spring 12a.iii) 0.250 pts

FA.DUTIL: ALL

Qz-1 intro:Objective of FA (Facility Association)

ensure..for..unable

A

162
E (2018.Spring 12a.iii) 0.250 pts

FA.DUTIL: ALL

Qz-1 intro:Objective of FA (Facility Association)

ensure..for..unable

  1. ensure auto insurance availability
    • For..
  2. all owners & licensed drivers
    • Who are..
  3. unable to obtain coverage through the voluntary market
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68
Q

163
E (2018.Spring 12a.i) 0.000 pts

FA.DUTIL: ALL

Qz-1 intro:Description of FA (who created FA, etc..)

created by..non-profit..

A

163
E (2018.Spring 12a.i) 0.000 pts

FA.DUTIL: ALL

Qz-1 intro:Description of FA (who created FA, etc..)

created by..non-profit..

  1. Created by insurance industry
  2. (unincorporated, non-profit) of (ALL auto insurers)
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69
Q

164
E (2018.Spring 12a.ii) 0.000 pts

FA.DUTIL: ALL

Qz-1 intro:Mission of FA

administer, enhance stability, minimize market share

A

164
E (2018.Spring 12a.ii) 0.000 pts

FA.DUTIL: ALL

Qz-1 intro:Mission of FA

administer, enhance stability, minimize market share

  1. Administer residual market mechanisms
  2. Enhance MS (market stability) through RSPs
  3. Minimize MS (market share), so consumers benefit from private mkt
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70
Q

165
E (2019.Spring 8a.) 0.750 pts

FA.DUTIL: ALL

Qz-1 org:Types of risk-sharing mechanisms administered by FA (3)

A

165
E (2019.Spring 8a.) 0.750 pts

FA.DUTIL: ALL

Qz-1 org:Types of risk-sharing mechanisms administered by FA (3)

  1. FARM (Facility Association Residual Market)
  2. RSPs (Risk-Sharing Pools)
  3. UAF (Uninsured Automobile Fund)
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71
Q

166
E (2017.Spring 7a.ii) 0.250 pts

FA.DUTIL: ALL

Qz-1 org:Key purpose of FARM

..minimize market share

A

166
E (2017.Spring 7a.ii) 0.250 pts

FA.DUTIL: ALL

Qz-1 org:Key purpose of FARM

..minimize market share

  • Provide coverage for risks that cannot be placed privately (also, FARM seeks to minimize market share)
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72
Q

167
E (2017.Spring 7a.i) 0.250 pts

FA.DUTIL: ALL

Qz-1 org:Key purpose of RSP

market stability

A

167
E (2017.Spring 7a.i) 0.250 pts

FA.DUTIL: ALL

Qz-1 org:Key purpose of RSP

market stability

  1. Enhance market stability by allowing insurers to pool bad risks that have passed their own U/W criteria
    • (premiums & losses are shared)
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73
Q

168

FA.DUTIL: ALL

Qz-1 org:Key purpose of UAF

..(no,inadeq)..

A

168

FA.DUTIL: ALL

Qz-1 org:Key purpose of UAF

..(no,inadeq)..

  • Provide compensation in cases of (no, inadequate) insurance
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74
Q

169
E (2019.Spring 8b.) 0.750 pts

FA.DUTIL: ALL

Qz-1 org:Where does FA operate its various mechanisms

A

169
E (2019.Spring 8b.) 0.750 pts

FA.DUTIL: ALL

Qz-1 org:Where does FA operate its various mechanisms

  1. FARM: everywhere except provinces with public auto (BC,MB,SK,QC)
  2. RSP: (ON, AB, NS, NB), note that Quebec operates its own RSP, called PRR
  3. UAF: Atlantic Provs
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75
Q

170

FA.DUTIL: ALL

Qz-1 org:FARM - what are servicing carriers

A

170

FA.DUTIL: ALL

Qz-1 org:FARM - what are servicing carriers

  • Member companies contracted by FA to issue/administer policies and adjust claims
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76
Q

171
E (2017.Fall 13a.) 1.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) areas of operational differences (6)

RA(CC)(P.claims)

A

171
E (2017.Fall 13a.) 1.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) areas of operational differences (6)

RA(CC)(P.claims)

  • RA(CC)(P.claims): memory trick - read it as ‘RACK-P dot Claims’
    1. R: rates
    2. A: admission
    3. C: customer knowledge
    4. C: # customers placed
    5. P: participation ratio
    6. Claims: U/W & claims admin
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77
Q

172
E (2018.Spring 12b.i) 0.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - rates

A

172
E (2018.Spring 12b.i) 0.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - rates

  • FARM: rates set by FA
  • RSP: uses rates of ceding company
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78
Q

173
E (2018.Spring 12b.ii) 0.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - admission

A

173
E (2018.Spring 12b.ii) 0.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - admission

  • FARM: only if agent/broker can’t place risk with voluntary company
  • RSP: use U/W rules of ceding company
79
Q

174
E (2017.Spring 7b.iii) 0.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - customer knowledge

A

174
E (2017.Spring 7b.iii) 0.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - customer knowledge

  • FARM: yes
  • RSP: no
80
Q

175
E (2014.Fall 13a.iv) 0.250 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - # customers placed

A

175
E (2014.Fall 13a.iv) 0.250 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - # customers placed

  • FARM: can be unlimited
  • RSP: depends on province, usually a % of: (T.V.PPA.NF.TPL) direct car-yrs, that is, (total, voluntary, PPA, non-Fleet, TPL) direct WE
81
Q

176
E (2016.Fall 10a.) 0.500 pts

FA.DUTIL: ALL

org:(FARM, RSP) operational differences regarding - participation ratio

A

176
E (2016.Fall 10a.) 0.500 pts

FA.DUTIL: ALL

org:(FARM, RSP) operational differences regarding - participation ratio

  • FARM: established separately by (jurisdiction, class, AY)
  • RSP: (T.V.PPA.NF.TPL) direct EE (i.e. Total, Voluntary, PPA, Non-Fleet, Third Party Liability)
82
Q

177
E (2017.Spring 7b.ii) 0.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - clms admin & U/W

A

177
E (2017.Spring 7b.ii) 0.500 pts

FA.DUTIL: ALL

Qz-2 org:(FARM, RSP) operational differences regarding - clms admin & U/W

  • FARM: uses servicing carriers (or 3rd party)
  • RSP: ceding company handles it
83
Q

178

FA.DUTIL: ALL

Qz-1 Board of Directors & Members:Functions of FA’s board of directors (4)

A

178

FA.DUTIL: ALL

Qz-1 Board of Directors & Members:Functions of FA’s board of directors (4)

  1. RATE CHANGES: approve rate changes & filings
  2. EXPENSES: authorize expenses
  3. STANDARDS: establish standards for servicing carriers & RSP users
  4. COMMITTEES: appoint committees & subcommittees
84
Q

179
E (2017.Spring 7c.) 1.000 pts

FA.DUTIL: ALL

Qz-1 FARM:5 classes of business for determing a member’s participation ratio

A

179
E (2017.Spring 7c.) 1.000 pts

FA.DUTIL: ALL

Qz-1 FARM:5 classes of business for determing a member’s participation ratio

  • FARM:
    1. (1) PPA (Non-Fleet, Non-Pool)
    2. (2) all auto EXCLUDING (1) and RSPs
  • RSPs
    1. (3) RSP in Ontario (except cat claim funds for ON accident benefits from insolvent insurer)
    2. (4) RSPs in (AB, NB, NS)
  • UAF (Uninsured Automobile Fund):
    1. (5) UM claims + the ON cat claim fund excluded from (3)
85
Q

180
E (2018.Spring 12c.) 0.750 pts

FA.DUTIL: ALL

Qz-3 RSP:What are the minimum requirements for risk-sharing pool transfer eligibility (5)

A

180
E (2018.Spring 12c.) 0.750 pts

FA.DUTIL: ALL

Qz-3 RSP:What are the minimum requirements for risk-sharing pool transfer eligibility (5)

  1. PPA only
  2. Insured can’t be eligible for FARM
  3. Policy must satisfy statutory minimum coverage requirements
  4. Insurer must follow proper classification & rating, and provide documentation
  5. Insurer must use approved rates
86
Q

181
E (2016.Fall 10c.i) 0.500 pts

FA.DUTIL: ALL

Qz-3 RSP:Describe how RSP operates regarding actual transfer of premium from insurer to pool

A

181
E (2016.Fall 10c.i) 0.500 pts

FA.DUTIL: ALL

Qz-3 RSP:Describe how RSP operates regarding actual transfer of premium from insurer to pool

  • Transferred premium = premium charged NET OF premium payment service charges
87
Q

182
E (2016.Fall 10c.ii) 0.500 pts

FA.DUTIL: ALL

Qz-3 RSP:Describe premium reimbursement from pool to insurer

A

182
E (2016.Fall 10c.ii) 0.500 pts

FA.DUTIL: ALL

Qz-3 RSP:Describe premium reimbursement from pool to insurer

  • Reimbursement = % of written premium (as an expense allowance)
  • Includes:
    1. claims adjustment
    2. LAE, acquisition
    3. Operating expenses
  • Excludes: taxes, license, fees
88
Q

183
E (2018.Spring 12d.i) 0.250 pts

FA.DUTIL: ALL

Qz-3 ON RSP:In Ontario, why is only 85% of each transferred risk covered

to maintain incentives

A

183
E (2018.Spring 12d.i) 0.250 pts

FA.DUTIL: ALL

Qz-3 ON RSP:In Ontario, why is only 85% of each transferred risk covered

to maintain incentives

  • Insurer retains incentives to (manage claims well, use effective U/W, maintain adequate pricing)
  • Otherwise they could simply off-load bad consequences of poor management
  • Note that FARM transfers 100% of risk
89
Q

184
E (2018.Spring 12d.ii) 0.250 pts

FA.DUTIL: ALL

Qz-3 ON RSP:In Ontario, why is there a limit of 5% of (voluntary, PPA, Non-Fleet exposures) that can be transferred to the pool

A

184
E (2018.Spring 12d.ii) 0.250 pts

FA.DUTIL: ALL

Qz-3 ON RSP:In Ontario, why is there a limit of 5% of (voluntary, PPA, Non-Fleet exposures) that can be transferred to the pool

  • Same as b.i + prevents insurer from sending all new policies to pool for first yr, then cherry-picking renewals from pool in yr 2
90
Q

185

FA.DUTIL: ALL

AB RSP:What are the 2 types of RSPs in Alberta

A

185

FA.DUTIL: ALL

AB RSP:What are the 2 types of RSPs in Alberta

  1. GRID:
    • for risks subject to statutory maximum premium
  2. Non-GRID:
    • for any risks the insurer feels are under-priced (similar to the Ontario RSP)
91
Q

186

FA.DUTIL: ALL

AB RSP:What is the difference between the Alberta GRID & non-GRID regarding pool transfer limits

A

186

FA.DUTIL: ALL

AB RSP:What is the difference between the Alberta GRID & non-GRID regarding pool transfer limits

  1. GRID:
    • no limit on # risks transferred
  2. Non-GRID:
    • limit = 4% x (Total, Voluntary, Non-Fleet, PPA) written car-yrs
92
Q

187

FA.DUTIL: ALL

AB RSP:What is the reason for the difference in transfer limits between the Alberta GRID & non-GRID pools

A

187

FA.DUTIL: ALL

AB RSP:What is the reason for the difference in transfer limits between the Alberta GRID & non-GRID pools

  1. GRID:
    • because Alberta law requires insurer to accept risks for which they have no control over price
  2. Non-GRID:
    • because Alberta law has a take-all-comers rule
93
Q

188
E (2018.Fall 10.) 1.500 pts

FA.DUTIL: ALL

Qz-3 ON vs AB:Identify differences between the ON and AB RSPs

A

188
E (2018.Fall 10.) 1.500 pts

FA.DUTIL: ALL

Qz-3 ON vs AB:Identify differences between the ON and AB RSPs

  1. Difference 1:
    • ON has 1 RSP
    • AB has 2 RSPs (GRID & non-GRID)
  2. Difference 2:
    • ON RSP covers 85% of ceded risk
    • AB RSPs cover 100% of ceded risk
  3. Difference 3:
    • ON has a 5% limit on risks that can be ceded
    • AB GRID has no limit (non-GRID has 4% limit)
94
Q

189

FA.DUTIL: ALL

NB RSP:Describe the New Brunswick RSP (who it serves, condition for transfer, transfer limit)

A

189

FA.DUTIL: ALL

NB RSP:Describe the New Brunswick RSP (who it serves, condition for transfer, transfer limit)

  1. Who it serves:
    • New Brunswick risks with New Brunswick insurers
  2. Transfer condition:
    • Household must have at least 1 recently licensed driver with a good driving record
  3. Limit
    1. = 8% x (Total, Voluntary, Non-Fleet, PPA) direct written exposures
95
Q

190

FA.DUTIL: ALL

NS RSP:Describe the Nova Scotia RSP (who it serves, condition for transfer, transfer limit)

A

190

FA.DUTIL: ALL

NS RSP:Describe the Nova Scotia RSP (who it serves, condition for transfer, transfer limit)

  1. Who it serves:
    • Nova Scotia risks with Nova Scotia insurers
      • (inexperienced drivers)
    • Transfer condition:
      • At least 1 household member is a driver with < 6 years experience with no accidents/convictions
    • Limit
      • = no limit
96
Q

191
E (2015.Fall 7d.) 0.500 pts

FA.DUTIL: ALL

Qz-3 misc:How is the RSP used to lower total LR (Loss Ratio)

A

191
E (2015.Fall 7d.) 0.500 pts

FA.DUTIL: ALL

Qz-3 misc:How is the RSP used to lower total LR (Loss Ratio)

  • Cede policies to RSP that have a higher LR than the RSP average
  • Then other companies will end up subsidizing the losses on these policies
  • ALSO: ceding the maximum amount lowers PR for RSP
97
Q

192
E (2015.Spring 12.) 0.500 pts

FA.DUTIL: ALL

Qz-3 misc:Is it possible to sustain a RSP running a profit

A

192
E (2015.Spring 12.) 0.500 pts

FA.DUTIL: ALL

Qz-3 misc:Is it possible to sustain a RSP running a profit

  • No: members only cede worst (unprofitable) risks so over time time the pool would become unprofitable (not sustainable)
98
Q

194
E (2014.Spring 9a.) 0.250 pts

FA.DUTIL: ALL

Qz-3 misc:How does a rate freeze (at inadequate rates) impact availability of coverage

A

194
E (2014.Spring 9a.) 0.250 pts

FA.DUTIL: ALL

Qz-3 misc:How does a rate freeze (at inadequate rates) impact availability of coverage

  • Availability for that class is reduced - insurers would stop accepting risks because they are unprofitable
99
Q

196
E (2013.Fall 7.) 1.000 pts

FA.DUTIL: ALL

Qz-3 misc:Justify ROE = 15% for high-risk business (vs regulator’s ROE of 10%) (2)

A

196
E (2013.Fall 7.) 1.000 pts

FA.DUTIL: ALL

Qz-3 misc:Justify ROE = 15% for high-risk business (vs regulator’s ROE of 10%) (2)

  1. Higher risk justifies higher returns to compensate
  2. Using lower ROE may cause insurer’s not offer product (reduces availability for consumer)
100
Q

200
E (2016.Fall 27e.) 0.750 pts

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:Identify components of the premium liabilities (or policy liabilities in connection to UPR) (4+2)

clms.re.main.ContComm

A

200
E (2016.Fall 27e.) 0.750 pts

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:Identify components of the premium liabilities (or policy liabilities in connection to UPR) (4+2)

clms.re.main.ContComm

According to the definition in Section 1 of the source text:

  • Policy liabilities in connection with unearned premium (premium liabilities) are:
    • liabilities for future events..
    • relating to the APV on the unexpired portion of the policies in-force at the valuation date..
    • consisting of:
      1. future claim & adjustment expense
      2. reinsurance costs (net only)
      3. maintenance costs
    • But this definition is incomplete and should also include:
      1. ​​contingent commissions
    • The examiner’s report also accepted these other answers:
      1. PDR or DPAE
      2. premium adjustments for swing-rated or retro-rated policies
101
Q

201
E (2014.Fall 25b.i) 0.250 pts

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:Define ‘DPAE asset’ (Deferred Policy Acquistion Expense) & give examples of such costs (3)

portion..incurred..

A

201
E (2014.Fall 25b.i) 0.250 pts

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:Define ‘DPAE asset’ (Deferred Policy Acquistion Expense) & give examples of such costs (3)

portion..incurred..

  • An ASSET that is the portion of prepaid acquisition expenses related to the UNEXPIRED PORTION OF THE POLICY & incurred when the policy issued
  • Example:
    1. commissions,
    2. TLF (Taxes, Licenses, Fees),
    3. advertising
102
Q

202
E (2014.Fall 25b.ii) 0.250 pts

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:What is the purpose of DPAE asset

recognizes..overPT

A

202
E (2014.Fall 25b.ii) 0.250 pts

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:What is the purpose of DPAE asset

recognizes..overPT

  1. To RECOGNIZE prepaid expenses over policy term PROVIDED such costs are recoverable from equity in UPR
  2. Matches premiums with expenses
103
Q

203

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:Define ‘UEComm’ (Unearned Reinsurance Commissions)

A

203

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:Define ‘UEComm’ (Unearned Reinsurance Commissions)

  • A LIABILITY arising from uneared commission on Reinsurance ceded FOR the unexpired portion of the ceded policy
104
Q

204

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:Define ‘PDR’ (Premium Deficiency Reserve)

A

204

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:Define ‘PDR’ (Premium Deficiency Reserve)

  • A LIABILITY arising when (equity in the NET UPR) < 0
105
Q

205
E (2018.Fall 26c.) 0.250 pts

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:True or false: if there is a premium deficiency then DPAE must = 0

A

205
E (2018.Fall 26c.) 0.250 pts

CIA.PrLiabs 1: INTRODUCTION

Qz-1 defns:True or false: if there is a premium deficiency then DPAE must = 0

  • True:
    • ==> one of PDR & DPAE is always 0
    • ==> if PDR > 0 there is a premium deficiency hence no DPAE asset
    • ==> if DPAE > 0 then unearned premium is sufficient to cover premium liabilities hence no PDR is required
106
Q

207
E (2019.Spring 14d.) 0.500 pts

CIA.PrLiabs APPENDICES: CALCULATING DPAE/PDR

Qz-3 calc:Methods for estimating the loss ratio for premium liabilities (4)

RICE

A

207
E (2019.Spring 14d.) 0.500 pts

CIA.PrLiabs APPENDICES: CALCULATING DPAE/PDR

Qz-3 calc:Methods for estimating the loss ratio for premium liabilities (4)

RICE

  • RICE
  1. Ratemaking analysis
  2. Industry benchmarks
  3. Claims liabilities loss ratio
  4. Expert judgment
    • (in other words, just ask Alice)
107
Q

210
E (2019.Spring 14c.) 0.750 pts

CIA.PrLiabs APPENDICES: CALCULATING DPAE/PDR

Qz-4 calc:Explain the impact on ROE if DPAE is reduced

A

210
E (2019.Spring 14c.) 0.750 pts

CIA.PrLiabs APPENDICES: CALCULATING DPAE/PDR

Qz-4 calc:Explain the impact on ROE if DPAE is reduced

  • Recall:
    1. ROE = (net income) / equity
  • Now:
    1. If DPAE decreases then equity decreases
      • (because equity = assets - liabilities)
    2. If equity decreases then ROE increases But
    3. If DPAE decreases then more premium acquisition is recognized in the current period
    4. If more premium acquisition is recognized then (net income) decreases
    5. If (net income decreases) then ROE decreases
  • Conclusion:
    1. Overall effect is uncertain
108
Q

213
E (2013.Fall 20b.) 0.750 pts

CIA.PrLiabs APPENDICES: CALCULATING DPAE/PDR

calc:How can evaluating by LOB then summing give different values for ‘equity in the unearned premium’

A

213
E (2013.Fall 20b.) 0.750 pts

CIA.PrLiabs APPENDICES: CALCULATING DPAE/PDR

calc:How can evaluating by LOB then summing give different values for ‘equity in the unearned premium’

  1. Basically doing LOBs together means that DPAE for one LOB can offset PDR for another
  2. Then just relate to given numbers
109
Q

214
E (2017.Fall 9a.) 0.750 pts

IBC.FLOOD 1: Introduction

Qz-1 ExecSumm:Specific reasons for non-coverage of overland flooding (3)

adverse.under.maps

A

214
E (2017.Fall 9a.) 0.750 pts

IBC.FLOOD 1: Introduction

Qz-1 ExecSumm:Specific reasons for non-coverage of overland flooding (3)

adverse.under.maps

  1. Adverse selection (if offered, would be too expensive)
  2. Govt under-investment in risk (planning, mitigation)
  3. Lack of effective flood hazard maps
110
Q

215

IBC.FLOOD 1: Introduction

Qz-1 ExecSumm:Examples of government under-investment in flood management (4)

BAIL (me out!)

A

215

IBC.FLOOD 1: Introduction

Qz-1 ExecSumm:Examples of government under-investment in flood management (4)

BAIL (me out!)

  1. BUILDING codes (obsolete)
  2. ASSET management (poor)
  3. INFRASTRUCTURE (lack of)
  4. LAND-use planning (inadequate)
111
Q

216
E (2019.Spring 9c.) 2.000 pts

IBC.FLOOD 1: Introduction

Qz-1 ExecSumm:Preconditions for strong flood risk management culture (4)

maps.IA$

A

216
E (2019.Spring 9c.) 2.000 pts

IBC.FLOOD 1: Introduction

Qz-1 ExecSumm:Preconditions for strong flood risk management culture (4)

maps.IA$

  1. FLOOD MAPS: for planning & risk management
  2. INFRASTRUCTURE: levies, sewers
  3. AWARENESS: of [risk, risk mitigation, financial management] by policyholders
  4. INCENTIVES: for Individual risk mitigation should be encouraged by limited govt compensation $s
112
Q

217

IBC.FLOOD 1: Introduction

Qz-1 intro:Most common type of natural disaster in Canada

A

217

IBC.FLOOD 1: Introduction

Qz-1 intro:Most common type of natural disaster in Canada

  • Overland flooding
113
Q

218

IBC.FLOOD 1: Introduction

Qz-1 Fld FinMgmt (intro):Trends making financial management of floods difficult (5)

growth (popn,..), concentration, weather, building, under-investment

A

218

IBC.FLOOD 1: Introduction

Qz-1 Fld FinMgmt (intro):Trends making financial management of floods difficult (5)

growth (popn,..), concentration, weather, building, under-investment

  1. GROWTH (popn | density | asset values)
  2. CONCENTRATED development in flood-prone areas
  3. Severe WEATHER
  4. Vulnerability due to obsolete BUILDING codes
  5. UNDER investment
114
Q

219

IBC.FLOOD 1: Introduction

Qz-1 Fld FinMgmt (Ins):Coverage availability

A

219

IBC.FLOOD 1: Introduction

Qz-1 Fld FinMgmt (Ins):Coverage availability

  • Residential:
    • Overland flooding: no
    • Sewer: yes, by endorsement
  • Auto, commercial:
    • Overland flooding: yes
115
Q

220
E (2016.Fall 8d.) 1.000 pts

IBC.FLOOD 1: Introduction

Qz-1 Fld FinMgmt (Ins):Why do insurers often cover uninsured floods (2)

A

220
E (2016.Fall 8d.) 1.000 pts

IBC.FLOOD 1: Introduction

Qz-1 Fld FinMgmt (Ins):Why do insurers often cover uninsured floods (2)

  1. Multi-peril causes from sewer (covered) & overland flooding (not covered)
    • Difficult to separate so insurers just pay everything
  2. Avoid reputational damage & political pressure
116
Q

221

IBC.FLOOD 1: Introduction

Qz-1 Fld FinMgmt (Ins):Why is overland flooding not insurable (2)

insurability requires: RUU

A

221

IBC.FLOOD 1: Introduction

Qz-1 Fld FinMgmt (Ins):Why is overland flooding not insurable (2)

insurability requires: RUU

  1. Insurability requires (Randomness, Uncertainty, Uncorrelated risks)
  2. Floods are (predictable, correlated) & large # of properties are affected at the same time
117
Q

222
E (2019.Spring 9b.) 1.000 pts

IBC.FLOOD 2: Case Studies

Qz-2 variables:Categories for international flood management approaches (6 variables)

m(pur.pak.price)sGov

A

222
E (2019.Spring 9b.) 1.000 pts

IBC.FLOOD 2: Case Studies

Qz-2 variables:Categories for international flood management approaches (6 variables)

m(pur.pak.price)sGov

  1. MODEL:
    • Public or private
  2. PURCHASE:
    • Mandatory or voluntary
  3. PACKAGING:
    • Bundled or optional
  4. PRICING:
    • Set by government or risk-based pricing
  5. SUBSIDIES:
    • Provided by other policyholders or through taxes
  6. GOVERNMENT ROLE:
    • Insurer or enabler
118
Q

223
E (2018.Spring 9a.) 1.000 pts

IBC.FLOOD 2: Case Studies

variables:Categories for international flood management approaches (6 variables)

m(pur.pak.price)sGov

A

223
E (2018.Spring 9a.) 1.000 pts

IBC.FLOOD 2: Case Studies

variables:Categories for international flood management approaches (6 variables)

m(pur.pak.price)sGov

  1. MODEL:
    • Public or private
  2. PURCHASE:
    • Mandatory or voluntary
  3. PACKAGING:
    • Bundled or optional
  4. PRICING:
    • Set by government or risk-based pricing
  5. SUBSIDIES:
    • Provided by other policyholders or through taxes
  6. GOVERNMENT ROLE:
    • Insurer or enabler
119
Q

225

IBC.FLOOD 2: Case Studies

Qz-2 UK:Describe the U.K. flood insurance program with respect to the 6 variables

A

225

IBC.FLOOD 2: Case Studies

Qz-2 UK:Describe the U.K. flood insurance program with respect to the 6 variables

  1. Private
  2. Voluntary
  3. Bundled with homeowner’s insurance
  4. Uses risk-based-pricing
  5. Cross-subsidized by policyholders
  6. Government is an enabler through (risk mitigation, flood mapping, zoning)
  • UPTAKE = 95%
120
Q

226

IBC.FLOOD 2: Case Studies

Qz-2 UK:U.K. flood insurance - purpose (3)

SA25

A

226

IBC.FLOOD 2: Case Studies

Qz-2 UK:U.K. flood insurance - purpose (3)

SA25

  1. Sustainability
  2. Maintain AA (affordability & availability)
  3. 25-yr transition to full private risk-based pricing
121
Q

227

IBC.FLOOD 2: Case Studies

Qz-2 UK:U.K. flood insurance - how does it work (4)

target.exclude

A

227

IBC.FLOOD 2: Case Studies

Qz-2 UK:U.K. flood insurance - how does it work (4)

target.exclude

  1. Target only high-risk properties (identified through risk-mapping)
  2. Excludes homes built after 2009 to discourage building in high-risk areas
  3. (if insurer’s risk-based-price is > price ceiling) (charge ceiling & cede to flood reinsurance)
  4. (if insurer’s risk-based-price is ≤ ceiling) insurer may retain risk
122
Q

228

IBC.FLOOD 2: Case Studies

Qz-2 UK:U.K. flood insurance - how is affordability ensured

A

228

IBC.FLOOD 2: Case Studies

Qz-2 UK:U.K. flood insurance - how is affordability ensured

  • Price ceilings
123
Q

229

IBC.FLOOD 2: Case Studies

Qz-2 UK:U.K. flood insurance - what is the role of Govt (3)

ceilings.FinRelief.inv

A

229

IBC.FLOOD 2: Case Studies

Qz-2 UK:U.K. flood insurance - what is the role of Govt (3)

ceilings.FinRelief.inv

  1. Set price ceilings
  2. Financial relief for cats exceeding pool capacity
  3. Infrastructure investment
124
Q

230
E (2019.Spring 10b.ii) 0.750 pts

IBC.FLOOD 2: Case Studies

Qz-2 U.S.:Evaluate the U.S. National Flood Insurance Program using criteria for evaluating government programs

A

230
E (2019.Spring 10b.ii) 0.750 pts

IBC.FLOOD 2: Case Studies

Qz-2 U.S.:Evaluate the U.S. National Flood Insurance Program using criteria for evaluating government programs

  1. Is it insurance or welfare:
    • it is insurance because people pay premiums and only covered losses are paid out
  2. Is it necessary:
    • yes, due to climate change and that private flood insurance is insufficient
  3. Is it efficient:
    • yes, costs are lower because there are no commissions or advertising costs
125
Q

231

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:Why is having a flood insurance program better than Govt disaster relief

indemnifies, incentivizes

A

231

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:Why is having a flood insurance program better than Govt disaster relief

indemnifies, incentivizes

  1. Insurance INDEMNIFIES whereas Govt provides basic relief only
  2. Insurance INCENTIVIZES through risk-based pricing whereas Govt relief is taxpayer funded, so no individual incentive for risk-mitigation
126
Q

232
E (2018.Fall 11b.) 1.000 pts

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:Cause & remedies for low uptake of flood insurance

A

232
E (2018.Fall 11b.) 1.000 pts

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:Cause & remedies for low uptake of flood insurance

  • CAUSE:
    • Adverse selection
  • REMEDIES:
    1. Make mandatory
    2. Bundle with other products/perils
    3. Taxpayers subsidies for high-risk insureds
  • Public/government admnistration
127
Q

233
E (2019.Spring 9a.) 0.500 pts

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:Advantages of bundling flood insurance

A

233
E (2019.Spring 9a.) 0.500 pts

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:Advantages of bundling flood insurance

  1. Higher uptake
  2. Reduces adverse selection (since not only high-risk insureds will purchase)
  3. Promotes affordability (cross-subsidization of high-risk insureds by low-risk insureds)
128
Q

234

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:State 1 advantage & 1 disadvantage of bundling flood insurance for low-risk policy holders

A

234

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:State 1 advantage & 1 disadvantage of bundling flood insurance for low-risk policy holders

  1. DISADVANTAGE: low-risk would subsidize high-risk
  2. ADVANTAGE: weather trends mean previously low-risk areas may suffer a flood disaster, and bundling ensures low-risk areas are covered
129
Q

235

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:Role of insurer in private flood insurance

UPEC

A

235

IBC.FLOOD 3: Best Practices

Qz-3 InsR Role:Role of insurer in private flood insurance

UPEC

  1. U/W: distinguish low & medium rsks from HIGH risks
  2. PRICING: use risk-based pricing
  3. EDUCATION: educate policyholders regardings risks, financial management, and mitigation
  4. CLAIMS: pay covered losses in timely manner
130
Q

236

IBC.FLOOD 3: Best Practices

Qz-3 Govt Role:Role of Govt in supporting private flood insurance (4)

MESA

A

236

IBC.FLOOD 3: Best Practices

Qz-3 Govt Role:Role of Govt in supporting private flood insurance (4)

MESA

  1. MITIGATION: promote mitigation of risk (structural: infrastructure,…) & (non-structural: zoning,…)
  2. EDUCATION: regarding awareness & management of flood risk
  3. SUBSIDIES: provide subsidies to high-risk households where risk-based pricing is unaffordable
  4. ASSESSMENT: of risk through accurate flood plain maps
131
Q

237
E (2018.Fall 11a.i) 1.000 pts

IBC.FLOOD 3: Best Practices

Qz-3 Govt Role:Describe 2 advantages & 2 disadvantages of a public & mandatory flood insurance system

A

237
E (2018.Fall 11a.i) 1.000 pts

IBC.FLOOD 3: Best Practices

Qz-3 Govt Role:Describe 2 advantages & 2 disadvantages of a public & mandatory flood insurance system

  • public & manadatory:
    • Advantages:
      1. High participation
      2. Affordability (high participation spreads risk & lowers cost)
    • Disadvantages:
      1. Government rates may not be actuarially sound
      2. Low risk subsudizes high risk (unfair)
132
Q

238
E (2018.Fall 11a.ii) 1.000 pts

IBC.FLOOD 3: Best Practices

Qz-3 Govt Role:Describe 2 advantages & 2 disadvantages of a private & voluntary flood insurance system

A

238
E (2018.Fall 11a.ii) 1.000 pts

IBC.FLOOD 3: Best Practices

Qz-3 Govt Role:Describe 2 advantages & 2 disadvantages of a private & voluntary flood insurance system

  • private & voluntary:
    • Advantages:
      1. Risk-based pricing means rate are actuarially sound
      2. Risk-based pricing incentivizes policyholder to mitigate risk (& receive reduced rates)
    • Disadvantages:
      1. Adverse selection (only high-risk customers will purchase)
      2. Rates may be unaffordable (due to adverse selection)
133
Q

239
E (2017.Fall 9c.) 0.500 pts

IBC.FLOOD 3: Best Practices

Qz-3 Govt Role:Why may Govt still need to supplement private flood insurance

A

239
E (2017.Fall 9c.) 0.500 pts

IBC.FLOOD 3: Best Practices

Qz-3 Govt Role:Why may Govt still need to supplement private flood insurance

  1. Private insurance may have coverage limits that are exceeded in a major disaster (so Govt pays amount not covered)
  2. Govt may subsidize otherwise uninsurable risks through taxation
134
Q

240

IBC.FLOOD 3: Best Practices

Qz-3 CdnImpact:How can flood insurance unaffordability for high-risk customers be addressed (2)

bundle.sub

A

240

IBC.FLOOD 3: Best Practices

Qz-3 CdnImpact:How can flood insurance unaffordability for high-risk customers be addressed (2)

bundle.sub

  1. BUNDLING: bundle flood with standard homeowner’s policy (low-risk customers subsidize high-risk)
  2. SUBSIDIES: Govt can provide subsidies through taxation
135
Q

241

IBC.FLOOD 3: Best Practices

Qz-3 CdnImpact:How is Canada starting to address flood management issues

EAP – NDMP

A

241

IBC.FLOOD 3: Best Practices

Qz-3 CdnImpact:How is Canada starting to address flood management issues

EAP – NDMP

  • 2014 EAP (Economic Action Plan) proposes developing NDMP (National Disaster Mitigation Plan)
136
Q

242

IBC.FLOOD 3: Best Practices

Qz-3 CdnImpact:NDMP objectives (general)

A

242

IBC.FLOOD 3: Best Practices

Qz-3 CdnImpact:NDMP objectives (general)

  1. Proactive approach to disaster risk management
  2. Reduce impact of natural catastrophes on Canadians
137
Q

245
E (2016.Spring 11c.) 0.250 pts

IBC.FLOOD 3: Best Practices

Qz-3 calc:Identify policy conditions to discourage development in a flood plain (2)

A

245
E (2016.Spring 11c.) 0.250 pts

IBC.FLOOD 3: Best Practices

Qz-3 calc:Identify policy conditions to discourage development in a flood plain (2)

  1. Require flood protection for policy activation
  2. Large, risk-based deductible
138
Q

246

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 intro:What is GF2 (Growing Forward 2)

(f-p-t) framework

A

246

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 intro:What is GF2 (Growing Forward 2)

(f-p-t) framework

  • Comprehensive (federal-provincial-territorial) framework for (Canada’s agricultural sector)
139
Q

247
E (2018.Spring 8a.) 0.750 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 intro:What are the BRMs (Business Risk Management) programs in GF2 (6)

ISIR, AdvPmts, WLPIP

A

247
E (2018.Spring 8a.) 0.750 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 intro:What are the BRMs (Business Risk Management) programs in GF2 (6)

ISIR, AdvPmts, WLPIP

  1. Agri-Insurance (protects against Production Loss)
  2. Agri-Stability (protects against Margin Decline)
  3. Agri-Investment (Investment Fund for small losses)
  4. Agri-Recovery (protects against Disaster)
  5. Advance Payments Program (low-interest loans for Cash Flow management)
  6. WLPIP - Western Livestock Price Insurance Program (protects against flucutuations in livestock prices)
140
Q

248

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 intro:How are the BRMs (Business Risk Management) programs funded

A

248

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 intro:How are the BRMs (Business Risk Management) programs funded

  1. (BRM: 1,2,3,6): Agri-Insurance, Agri-Stability, Agri-Investment, WLPIP:
    • FUNDED BY (producer-provincial-federal)
  2. (BRM 4): Agri-Recovery:
    • FUNDED BY (provincial-federal)
  3. (BRM 5): Advance Payment Program (5):
    • FUNDED BY (federal)
141
Q

249
E (2017.Spring 8a.) 0.250 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Probable yield

expected..measures..

A

249
E (2017.Spring 8a.) 0.250 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Probable yield

expected. .measures..
* Expected yield of an agricultural product (measures coverage in yield-based plans)

142
Q

250

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Balance-back factor

A

250

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Balance-back factor

  • (factor applied to aggregate premium) to correct for (individual discounts & surcharges)
143
Q

251

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Risk-splitting benefits

ind..subset..

A

251

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Risk-splitting benefits

ind. .subset..
* Indemnity based on a subset of production (for a given agricultural product)

144
Q

252
E (2018.Fall 12b.i) 0.250 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Reinsurance load

A

252
E (2018.Fall 12b.i) 0.250 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Reinsurance load

  • To account for reinsurance costs when the province purchases reinsurance
145
Q

253
E (2015.Fall 10a.i) 0.250 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Uncertainty load (or risk margin)

lim(DAM)

A

253
E (2015.Fall 10a.i) 0.250 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Uncertainty load (or risk margin)

lim(DAM)

  • A load in rates to account for limitations in (data, assumptions, methods)
146
Q

254
E (2018.Fall 12b.ii) 0.250 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Self-sustainability load

deficit.surplus

A

254
E (2018.Fall 12b.ii) 0.250 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Self-sustainability load

deficit. surplus
* A load in rates to recover deficits & maintain surplus

147
Q

255
E (2015.Fall 10b.) 0.500 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Reason for (uncertainty, self-sustainability) load

A

255
E (2015.Fall 10b.) 0.500 pts

CHEV.AGRIC 1,2: INTRO & GLOSSARY

Qz-1 glossary:Reason for (uncertainty, self-sustainability) load

  1. Uncertainty load: covers future contingencies
  2. Self-sustainability load: recovers past deficits
148
Q

256

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 intro:Actuarial Certification - what is the content of such certification

ProbYld.Pricing.Self-Sust

A

256

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 intro:Actuarial Certification - what is the content of such certification

ProbYld.Pricing.Self-Sust

  • The Actuarial Certification should provide an opinion on:
    1. METHOD for calculating probable yield (for deriving exposure for yield-based plans)
    2. METHOD for pricing
    3. SELF-SUSTAINABILITY of program
149
Q

257

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 intro:Actuarial Certification - why is it required

A

257

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 intro:Actuarial Certification - why is it required

  • For federal funding
150
Q

258

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 intro:Actuarial Certification - how often is it required

A

258

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 intro:Actuarial Certification - how often is it required

  1. Frequency is determined using a RISK-BASED approach
  2. At least every 5 yrs
151
Q

259

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 intro:Actuarial Certification - what triggers the requirement of a new certification (2)

chgs(PD.M).new

A

259

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 intro:Actuarial Certification - what triggers the requirement of a new certification (2)

chgs(PD.M).new

  1. Significant changes in program design or methods
  2. New crops
152
Q

260
E (2018.Fall 12a.) 0.250 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 regulation:Key elements of Canadian Agri-Insurance Regulation (4)

A

260
E (2018.Fall 12a.) 0.250 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-2 regulation:Key elements of Canadian Agri-Insurance Regulation (4)

  1. Minimum deductible = 10%
  2. Probable yields must reflect DEMONSTRATED production capabilities (to prevent over-insurance)
  3. Rates must be ACTUARIALLY SOUND (include self-sustainability load + relevant costs)
  4. Actuarial Certification is required (if uncertified, then federal govt may reduce premium contributions to province)
153
Q

261
E (2016.Spring 8a.i) 0.500 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 types of AgriIns plans:Identify the main types of Agri-Insurance plans & provide examples of each

y(I-C).ny(WAM)

A

261
E (2016.Spring 8a.i) 0.500 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 types of AgriIns plans:Identify the main types of Agri-Insurance plans & provide examples of each

y(I-C).ny(WAM)

  1. Yield-based plan (individual OR collective)
  2. Non-yield-based plan (weather derivative, acre-based, mortality for livestock)
154
Q

262
E (2016.Spring 8a.ii) 0.500 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 types of plans:When does yield-based plan pay

A

262
E (2016.Spring 8a.ii) 0.500 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 types of plans:When does yield-based plan pay

  • Pays when: (individual OR collective production) < (production guarantee) FOR a specified agricultural product
155
Q

263
E (2016.Spring 8b.i) 0.500 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 types of plans:What is the coverage trigger for a non-yield based, weather derivative plan

A

263
E (2016.Spring 8b.i) 0.500 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 types of plans:What is the coverage trigger for a non-yield based, weather derivative plan

  • TRIGGER: when pre-determined meteorological thresholds are breached REGARDLESS of actual production
156
Q

264
E (2016.Spring 8b.ii) 0.500 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 types of plans:What is the coverage trigger for a non-yield based, tree mortality plan

A

264
E (2016.Spring 8b.ii) 0.500 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 types of plans:What is the coverage trigger for a non-yield based, tree mortality plan

  • TRIGGER: when more than a certain % of trees are destroyed by an insured peril REGARDLESS of actual production
157
Q

265

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 probable yields:What is the formula for probable yield in a yield-based plan (easy - just say it in words)

A

265

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 probable yields:What is the formula for probable yield in a yield-based plan (easy - just say it in words)

  • Average of yearly production yields
158
Q

266

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 probable yields:Adjustments to historical yields - what is the purpose of such adjustments

A

266

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 probable yields:Adjustments to historical yields - what is the purpose of such adjustments

  • To reflect current production capability (similar to on-leveling premiums)
159
Q

267
E (2017.Spring 8b.) 1.000 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 probable yields:Adjustments to historical yields - what are the triggers for making such adjustments (5)

(changes in farming, program, data), perennials, crop quality

A

267
E (2017.Spring 8b.) 1.000 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 probable yields:Adjustments to historical yields - what are the triggers for making such adjustments (5)

(changes in farming, program, data), perennials, crop quality

  1. A change in farming or management practices
  2. A change in insurance program design
  3. A change in data source or data collection technique
  4. Maturity of perennials (yield would vary over their life cycle)
  5. Quality variation of crop from year-to-year (due to insured perils or other cause)
160
Q

268
E (2017.Spring 8c.i) 1.000 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 probable yields:Stabilizing methods for probable yields - identify the stabilizing methods (6)

Alice Can Select Cool Smoothing Techniques

A

268
E (2017.Spring 8c.i) 1.000 pts

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

Qz-3 probable yields:Stabilizing methods for probable yields - identify the stabilizing methods (6)

Alice Can Select Cool Smoothing Techniques

>Alice Can Select Cool Smoothing Techniques:

  1. Average:
    • Use a long-term average of historical yields (15-25yrs)
  2. Cap:
    • cap data to limit year-over-year changes
  3. Split:
    • split basic & excess coverage since excess coverage is more volatile
  4. Cushion:
    • Give data outliers smaller weights when averaging (to cushion their effect)
  5. Smooth:
    • Apply floors/ceilings to data points (to smooth the effect of outliers)
  6. Transition (rules):
    • Use transition rules after introducing a new yield method (to smooth the transition)
161
Q

269

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

probable yields:How do you calculate probable yield given NO missing years of data

A

269

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

probable yields:How do you calculate probable yield given NO missing years of data

  • Probable yield = avg ( production yield over all years )
162
Q

270

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

probable yields:How do you calculate probable yield when there ARE missing years of data

A

270

CHEV.AGRIC 4a: PRODUCTION INSURANCE PROGRAMS

probable yields:How do you calculate probable yield when there ARE missing years of data

  • Probable yield = avg (production yield over all years)
    • But FILL IN missing years with: (Provincial Avg x index)
    • Where INDEX = avg ( Production Yld / Provincial Yld ) USING yrs for which producer data is available
163
Q

271
E (2016.Spring 8c.i) 0.250 pts

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 prod G&L:Formulas - yield-based plans: (PG, L) or Production Guarantee & Liability

A

271
E (2016.Spring 8c.i) 0.250 pts

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 prod G&L:Formulas - yield-based plans: (PG, L) or Production Guarantee & Liability

  1. PG = APC
  2. L$ = APC x (insured unit price)
    • Where

A = insured Area

P = Probable yield per unit of area

C = coverage level %

164
Q

272

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 prod G&L:Formulas - non-yield-based plans: (PG, L) or Production Guarantee & Liability

A

272

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 prod G&L:Formulas - non-yield-based plans: (PG, L) or Production Guarantee & Liability

  • PG formula is not applicable since there is NO production guarantee for non-yield-based plans
  • L$ = (# insured units) x (insured unit price)
165
Q

273
E (2016.Spring 8c.ii) 0.250 pts

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 indemnity:Yield-based plan - formulas: indemnity $s

A

273
E (2016.Spring 8c.ii) 0.250 pts

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 indemnity:Yield-based plan - formulas: indemnity $s

  • Indem$ = MAX(0, PG - AP) x (insured unit price)
    • Where
  • PG = Production Guarantee
  • AP = Actual Production
166
Q

276

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 indemnity:Non-yld-based plan - types of weather events that are covered (3)

A

276

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 indemnity:Non-yld-based plan - types of weather events that are covered (3)

  1. Excessive rainfall
  2. Drought
  3. Freeze
167
Q

.$.deduc

277

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 indemnity:Non-yld-based plan - identify variables that affect compensation in such plans (3)

A

.$.deduc

277

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 indemnity:Non-yld-based plan - identify variables that affect compensation in such plans (3)

  1. # units affected
  2. Insured price
  3. Deductible
168
Q

278

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - what are included/excluded in rate calculations for production insurance programs

A

278

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - what are included/excluded in rate calculations for production insurance programs

  1. Expected losses only (administrative costs are shared between federal & provincial govt)
169
Q

279

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - formula for Prem$

A

279

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - formula for Prem$

  • Prem$ = PremRt x L$ (Note that PremRt varies by Covg%)
170
Q

280

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - formula for Indem$ (& IndemRt)

A

280

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - formula for Indem$ (& IndemRt)

  • Indem$ = IndemRt x L$ (Note: First calculate Indem$ using above formula THEN calculate IndemRt THEN feed into PremRt)
171
Q

281

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - what are the consequences of rate instability

fluctuations, adverse selection

A

281

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - what are the consequences of rate instability

fluctuations, adverse selection

  1. Fluctuations in participation, adverse selection
172
Q

282

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - what load factors must be incorporated to arrive at the final PremRt

IRt(UB+/-RS) (alternately or SIR BUDs)

A

282

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - what load factors must be incorporated to arrive at the final PremRt

IRt(UB+/-RS) (alternately or SIR BUDs)

  • To get PREMIUM RATE, start with INDEMNITY RATE then incorporate:
    1. Uncertainty margin
    2. Balance-back factors
    3. Individual discount/surcharge
    4. Reinsurance load
    5. Self-sustainability load
173
Q

283

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - how are NON-yield-based plans priced

A

283

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - how are NON-yield-based plans priced

  • Same as yld-based plans (IRt(UB+/-RS)
    • But possibly with extra considerations
  • EXAMPLE: weather-derivative plans may have extra considerations like temperature thresholds
174
Q

284
E (2015.Fall 10c.) 0.500 pts

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - identify pricing considerations for weather derivative plans (2)

weather: data, effects

A

284
E (2015.Fall 10c.) 0.500 pts

CHEV.AGRIC 4b: PRODUCTION INSURANCE PROGRAMS

Qz-4 premiums:Production insurance programs - identify pricing considerations for weather derivative plans (2)

weather: data, effects

  1. CONSIDERATION 1 - DATA: long-term history of meteorological data (vs producer data)
  2. CONSIDERATION 2 - EFFECTS: how weather affects production losses
175
Q

285
E (2018.Fall 12b.iv) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the federal requirement for self-sustainability (statistical defn)

A

285
E (2018.Fall 12b.iv) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the federal requirement for self-sustainability (statistical defn)

  • FOR ALL (base, adverse) scenarios with INITIAL DEFICIT = 6th yr 95th percentile:
    • MUST RECOVER DEFICIT IN (15yrs: avg, 25yrs: 80% prob)
176
Q

286

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the BASIS for the self-sustainability load selection

Targ($%x.perc)

A

286

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the BASIS for the self-sustainability load selection

Targ($%x.perc)

  • LOAD BASIS = (selected target surplus level), and can be expressed in different ways
    1. $-value
    2. % of liability dollars
    3. Multiple of premiums
    4. Percentile over a given time horizon
177
Q

287
E (2018.Fall 12c.(i,ii) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the basis for the self-sustainability test

A

287
E (2018.Fall 12c.(i,ii) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the basis for the self-sustainability test

  • TEST BASIS: 25-yr stochastic simulation of financial position
178
Q

288

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the source of VOLATILITY in stochastic simulations of self-sustainability

A

288

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the source of VOLATILITY in stochastic simulations of self-sustainability

  • Mainly the indemnity component
    • Because the (probable yield & premium rate) methodologies are designed to avoid large year-to-year variations
179
Q

289

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the actuary’s role regarding the self-sustainability test

design.confirm

A

289

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:What is the actuary’s role regarding the self-sustainability test

design. confirm
* The actuary should (design OR confirm) methodology for calculating the self-sustainability load

180
Q

290
E (2018.Fall 12b.iii) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:Actuary - identify adverse scenarios relevant to self-sustainability in agri-insurance

A

290
E (2018.Fall 12b.iii) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:Actuary - identify adverse scenarios relevant to self-sustainability in agri-insurance

  1. Increase in liabilities (increases maximum exposure)
  2. Decrease in liabilities
    • This can be severe when surplus vulnerable after cat since future premiums are lower & deficit recovery takes longer
  3. Adverse claims experience
  4. Introduction of a new insurance plan
  5. Deterioration in market value of investments
  6. Combination of the above scenarios
181
Q

291
E (2017.Fall 8b.) 0.750 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:Test - compare agricultural self-sustainability to DCAT (Similarity, Difference)

(base.adv):FullStoch

A

291
E (2017.Fall 8b.) 0.750 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 self-sust:Test - compare agricultural self-sustainability to DCAT (Similarity, Difference)

(base.adv):FullStoch

  1. SIMILARITY: both consider (base, adverse) scenarios
  2. DIFFERENCES: agricultural self-sustainability uses a fully stochastic simulation over a longer time horizon
182
Q

292

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 GovtRe:Is Govt reinsurance for agri-insurance considered traditional reinsurance

A

292

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 GovtRe:Is Govt reinsurance for agri-insurance considered traditional reinsurance

  • No, it’s an optional deficit-financing scheme
  • Province may finance deficits as they occur VERSUS regularly contributing to a govt reinsurance fund
183
Q

293

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 GovtRe:Describe the FUNDING mechanism for govt reinsurance for agri-insurance

A

293

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 GovtRe:Describe the FUNDING mechanism for govt reinsurance for agri-insurance

  1. Provincial producer programs contribute a % of premium to (provincial & federal) reinsurance
  2. Amount is based on (surplus position & risk profile)
  3. Must self-sustain for 25 yrs
184
Q

294

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 GovtRe:What triggers govt reinsurance for an agri-insurance program

A

294

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 GovtRe:What triggers govt reinsurance for an agri-insurance program

  • When SURPLUS of the production insurance fund is DEPLETED
  • Note that indemnities net of private insurance are paid out of production insurance fund first (shout-out to IK!))
185
Q

295
E (2015.Spring 14a.) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 roles:Identify the roles & responsibilities of the FEDERAL govt in agri-insurance programs

guidelines, financing

A

295
E (2015.Spring 14a.) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 roles:Identify the roles & responsibilities of the FEDERAL govt in agri-insurance programs

guidelines, financing

  1. Develop guidelines for production insurance programs
  2. Provide financing mechanism when programs are in deficit position
186
Q

296
E (2015.Spring 14b.) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 roles:Identify the roles & responsibilities of the PROVINCIAL govt in agri-insurance programs

rates, claims

A

296
E (2015.Spring 14b.) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 roles:Identify the roles & responsibilities of the PROVINCIAL govt in agri-insurance programs

rates, claims

  1. Determine (probable yield, premium rate)
  2. Manage claims
187
Q

297
E (2015.Spring 14c.) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 roles:Identify the roles & responsibilities of the PRODUCERS in agri-insurance programs

pay, report

A

297
E (2015.Spring 14c.) 0.500 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 roles:Identify the roles & responsibilities of the PRODUCERS in agri-insurance programs

pay, report

  1. Pay their share of the premium
  2. Report yields
188
Q

298
E (2018.Spring 8c.) 0.250 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 roles:Identify the roles & responsibilities of the PRIVATE INSURANCE & reinsurance in agri-insurance programs

unInsured perils, reinsurance for govt

A

298
E (2018.Spring 8c.) 0.250 pts

CHEV.AGRIC 4c: PRODUCTION INSURANCE PROGRAMS

Qz-5 roles:Identify the roles & responsibilities of the PRIVATE INSURANCE & reinsurance in agri-insurance programs

unInsured perils, reinsurance for govt

  1. PRIVATE INSURANCE: provides coverage (for producer) for perils not covered under govt insurance (Ex: fire)
  2. REINSURANCE: provides reinsurance for Govt INSURANCE
189
Q

299

CHEV.AGRIC: SUPP

Qz-6 Bloom’s Taxonomy:**Compare the different triggers for:

(1) Actuarial Certification
(2) Historical Adjustments to Probable Yield
(3) Risk Transfer Test**

A

299

CHEV.AGRIC: SUPP

Qz-6 Bloom’s Taxonomy:**Compare the different triggers for:

(1) Actuarial Certification
(2) Historical Adjustments to Probable Yield
(3) Risk Transfer Test**

  1. Actuarial Certification:
    • Significant changes in program design or methods
    • New crops
  2. Historical Adjustments to Probable Yield:
    • A change in farming or management practices
    • A change in insurance program design
    • A change in data source or data collection technique
    • Maturity of perennials (yield would vary within their life cycle)
    • Quality variation of crop from year-to-year (due to insured perils or other cause)
  3. Risk Transfer Test:
    • Inception of contract
    • When contract change significantly alters expected future cash flows
190
Q

300

CHEV.AGRIC: SUPP

Qz-6 Bloom’s Taxonomy:Examples of areas where Actuarial Certifications are required (4)

A

300

CHEV.AGRIC: SUPP

Qz-6 Bloom’s Taxonomy:Examples of areas where Actuarial Certifications are required (4)

  1. Agricultural Insurance Production Programs
  2. Risk Transfer Analysis
  3. Valuation of Reserves
  4. Rate Filings (certain aspects)
191
Q

301

CHEV.AGRIC: SUPP

Qz-6 Bloom’s Taxonomy:Examples of areas where Transition Rules are used (2)

A

301

CHEV.AGRIC: SUPP

Qz-6 Bloom’s Taxonomy:Examples of areas where Transition Rules are used (2)

  1. Agricultural Insurance - Probable Yield calculation:
    • After a new methodology is introduced
    • Use “transition rules” or “stabilizing methods” to prevent sudden large changes
  2. Rating:
    • Prevents individual policyholders from getting a big rate change all at once
192
Q

302

CHEV.AGRIC: SUPP

Qz-6 Bloom’s Taxonomy:Examples of areas where stochastic models are used

A

302

CHEV.AGRIC: SUPP

Qz-6 Bloom’s Taxonomy:Examples of areas where stochastic models are used

  1. Agricultural Insurance
    • For adverse scenarios in self-sustainability model
  2. DCAT scenarios
    • When risk distribution is easily inferred
  3. MfADs
    • Where the cost distribution is skewed, and deterministic methods may not work well

6 (9 decks)

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