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1
Q
A
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2
Q

768
E (2018.Fall 3a.i) 1.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the continuum of rate regulation approaches (2,3,2)

AMC

A

768
E (2018.Fall 3a.i) 1.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the continuum of rate regulation approaches (2,3,2)

AMC

  1. ACTIVE regulation (government mandated, prior approval)
  2. MODERATE rate regulation (file & use, use & file, flex rating)
  3. COMPETITIVE (file only, open competition)
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3
Q

769
E (2018.Fall 3a.ii) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: GOVERNMENT MANDATED

A

769
E (2018.Fall 3a.ii) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: GOVERNMENT MANDATED

  1. Government sets (Rates, Rate Changes, Risk Classification)
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4
Q

770
E (2018.Fall 3a.iii) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: PRIOR APPROVAL

A

770
E (2018.Fall 3a.iii) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: PRIOR APPROVAL

  1. Government approves (Rates, Rate Changes, Risk Classification) before use
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5
Q

771
E (2018.Fall 3a.iv) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: FILE & USE

A

771
E (2018.Fall 3a.iv) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: FILE & USE

  • Insurer files (Rates, Rate Changes, Risk Classification)
  • Regulators have a set period to approve/disapprove otherwise rates can be used (30-90 days)
  • Filing docs are simpler than for Prior Approval
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6
Q

772
E (2018.Fall 3a.v) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: USE & FILE

A

772
E (2018.Fall 3a.v) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: USE & FILE

  • Insurer uses (Rates, Rate Changes, Risk Classification) and files with regulators
  • Regulators can retroactively change rates within a certain period
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7
Q

773
E (2018.Fall 3a.vi) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: FLEX RATING

A

773
E (2018.Fall 3a.vi) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: FLEX RATING

  • Insurer uses (Rates, Rate Changes, Risk Classification) provided rate changes are WITHIN a certain range
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8
Q

774
E (2018.Fall 3a.vii) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: FILE ONLY

A

774
E (2018.Fall 3a.vii) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: FILE ONLY

  • Insurer files (Rates, Rate Changes, Risk Classification)
  • But NO review or approval is required
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9
Q

775
E (2018.Fall 3a.viii) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: OPEN COMPETITION

A

775
E (2018.Fall 3a.viii) 0.000 pts

KPMG.RegOv: All

Qz-1 [5] Rate Regulation approaches:Describe the rate regulation approach: OPEN COMPETITION

  1. No filing required
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10
Q

776

KPMG.RegOv: All

Qz-2 [6] intro:Identify the main regulatory concerns for auto insurance (2)

AA

A

776

KPMG.RegOv: All

Qz-2 [6] intro:Identify the main regulatory concerns for auto insurance (2)

AA

  1. Availability & affordability
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11
Q

777

KPMG.RegOv: All

Qz-2 [6] intro:Rate Regulation mechanisms vary by province: (yes/no)

A

777

KPMG.RegOv: All

Qz-2 [6] intro:Rate Regulation mechanisms vary by province: (yes/no)

  1. Yes
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12
Q

778

KPMG.RegOv: All

Qz-2 [6] intro:Which provinces/territories use 1 approach for all required vehicles (5)

A

778

KPMG.RegOv: All

Qz-2 [6] intro:Which provinces/territories use 1 approach for all required vehicles (5)

  1. NS (prior approval)
  2. PEI (file & use)
  3. YK, NV, NWT (open competition)
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13
Q

779

KPMG.RegOv: All

Qz-2 [6] intro:Identify external considerations affecting Rate Regulation

reg-MEP

A

779

KPMG.RegOv: All

Qz-2 [6] intro:Identify external considerations affecting Rate Regulation

reg-MEP

  1. Market cycle, economic conditions, politics
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14
Q

780
E (2018.Fall 3a.ix) 1.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: GOVERNMENT MANDATED

A

780
E (2018.Fall 3a.ix) 1.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: GOVERNMENT MANDATED

  1. Alberta GRID, BC
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15
Q

781
E (2018.Fall 3a.x) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: PRIOR APPROVAL

A

781
E (2018.Fall 3a.x) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: PRIOR APPROVAL

  1. Ontario major filings
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16
Q

782
E (2018.Fall 3a.xi) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: FILE & USE

A

782
E (2018.Fall 3a.xi) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: FILE & USE

  1. PEI
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17
Q

783
E (2018.Fall 3a.xii) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: USE & FILE

A

783
E (2018.Fall 3a.xii) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: USE & FILE

  1. Quebec
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18
Q

784
E (2018.Fall 3a.xiii) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: FLEX RATING

A

784
E (2018.Fall 3a.xiii) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: FLEX RATING

  1. NOT USED IN CANADA
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19
Q

785
E (2018.Fall 3a.xiv) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: OPEN COMPETITION

A

785
E (2018.Fall 3a.xiv) 0.000 pts

KPMG.RegOv: All

Qz-2 [6] Rate Regulation types:Identify an example of the rate regulation approach: OPEN COMPETITION

  1. Nunavut, Yukon
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20
Q

786
E (2019.Spring 2a.) 0.250 pts

KPMG.RegOv: All

Qz-2 exam:Consistent with provincial regs? BC private insurer files Coll and Comp changes and waits for approval before using rates

A

786
E (2019.Spring 2a.) 0.250 pts

KPMG.RegOv: All

Qz-2 exam:Consistent with provincial regs? BC private insurer files Coll and Comp changes and waits for approval before using rates

  1. No - Coll & Comp are optional coverages and optional coverages are governed by OPEN COMPETITION
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21
Q

787
E (2019.Spring 2b.) 0.250 pts

KPMG.RegOv: All

Qz-2 exam:Consistent with provincial regs? NS must file rates with NC Utility & Review Board within specified period after using rates

A

787
E (2019.Spring 2b.) 0.250 pts

KPMG.RegOv: All

Qz-2 exam:Consistent with provincial regs? NS must file rates with NC Utility & Review Board within specified period after using rates

  1. No - NS uses PRIOR APPROVAL
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22
Q

788
E (2019.Spring 2c.) 0.250 pts

KPMG.RegOv: All

Qz-2 exam:Consistent with provincial regs? QC private insurer uses property damage rates before submitting filing

A

788
E (2019.Spring 2c.) 0.250 pts

KPMG.RegOv: All

Qz-2 exam:Consistent with provincial regs? QC private insurer uses property damage rates before submitting filing

  1. Yes - QC is USE & FILE
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23
Q

789
E (2019.Spring 2d.) 0.250 pts

KPMG.RegOv: All

Qz-2 exam:Consistent with provincial regs? AB acts a monopoly in providing insurance for TNCs

A

789
E (2019.Spring 2d.) 0.250 pts

KPMG.RegOv: All

Qz-2 exam:Consistent with provincial regs? AB acts a monopoly in providing insurance for TNCs

  1. No - TNC is provided by private insurers
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24
Q

790
E (2012.Fall 4b.i) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Benefits to policy holders of switching: Prior Approval -> Use & File - i

rate volatility, rates

A

790
E (2012.Fall 4b.i) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Benefits to policy holders of switching: Prior Approval -> Use & File - i

rate volatility, rates

  • Less Rate Volatility (faster rate updates, lower price swings)
  • Lower rates (due to lower filing costs)
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25
Q

791
E (2012.Fall 4b.ii) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Benefits to policy holders of switching: Prior Approval -> Use & File - ii

insurers like it..

A

791
E (2012.Fall 4b.ii) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Benefits to policy holders of switching: Prior Approval -> Use & File - ii

insurers like it..

  1. Insurers like use & file:
    • If more insurers are operating –> more competition & innovation –> good for consumers
    • Regulators can then focus on solvency which protects policy holders (versus worrying about rate approval)
26
Q

792
E (2018.Fall 3b.) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Identify advantages to flex rating

A

792
E (2018.Fall 3b.) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Identify advantages to flex rating

  • Less volatility in rates (rate changes must be within a specified range)
  • Lower expenses (versus prior approval)
27
Q

793
E (2017.Spring 3a.) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Regulatory approval - which is faster (File & Use vs Prior Approval)

A

793
E (2017.Spring 3a.) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Regulatory approval - which is faster (File & Use vs Prior Approval)

  1. Defns:
    1. File & Use: government has set period to approve otherwise rates can be used
    2. Prior Approval: must approve before use
  2. ANSWER:
    • File & Use probably faster due to set period of approval
    • But can’t be used for all lines of business in all provinces
28
Q

794
E (2017.Spring 3b.) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Regulatory approval - which is faster (Open Competition vs Prior Approval)

A

794
E (2017.Spring 3b.) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Regulatory approval - which is faster (Open Competition vs Prior Approval)

  1. Defns:
    1. Open Competition: no approval required
    2. Prior Approval: see (2017.Spring #3a)
  2. ANSWER:
    • Open Competition is faster to market
    • Valid only in NU, YK
29
Q

795
E (2017.Spring 3c.) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Regulatory approval - which is faster (Use & File, File & Use)

A

795
E (2017.Spring 3c.) 0.500 pts

KPMG.RegOv: All

Qz-3 misc:Regulatory approval - which is faster (Use & File, File & Use)

  1. Defns:
    1. Use & File: no approval required but regulators can retroactively change rates
    2. File & Use: see (2017.Spring #3a)
  2. ANSWER:
    • Usage under Use & File faster since there is no waiting period before use
    • Valid only in QC
30
Q

796

BCAR.CDN2018: All

Qz-1 intro:What is the purpose of A.M. Best’s financial strength ratings

A

796

BCAR.CDN2018: All

Qz-1 intro:What is the purpose of A.M. Best’s financial strength ratings

  1. To provide an opinion on the financial strength of an insurer
  2. (and it’s ability to meet ongoing obligations to policyholders)
31
Q

797

BCAR.CDN2018: All

Qz-1 intro:What is the BCAR formula

A

797

BCAR.CDN2018: All

Qz-1 intro:What is the BCAR formula

  1. BCAR = (AC - NRC) / AC x 100
  2. (calculated at 4 different VaR levels)
32
Q

798

BCAR.CDN2018: All

Qz-2 available capital:How is AC (Available Capital) calculated in the BCAR formula

A

798

BCAR.CDN2018: All

Qz-2 available capital:How is AC (Available Capital) calculated in the BCAR formula

  • Start with balance sheet reported capital (surplus)
  • Make appropriate adjustments
33
Q

799

BCAR.CDN2018: All

Qz-2 available capital:Identify adjustments to balance sheet capital to obtain BCAR Available Capital

EDO

A

799

BCAR.CDN2018: All

Qz-2 available capital:Identify adjustments to balance sheet capital to obtain BCAR Available Capital

EDO

  1. EDO: lura-sd-fig
    1. Equity adjustments:
      • loss reserves
      • unearned premiums
      • reinsurance
      • assets
    2. Debt adjustments:
      • surplus notes
      • debt service requirements
    3. Other adjustments:
      • future operating costs
      • intangibles
      • goodwill
34
Q

800

BCAR.CDN2018: All

Qz-2 available capital:Why don’t we use unadjusted reported capital as the value for AC (Available Capital)

A

800

BCAR.CDN2018: All

Qz-2 available capital:Why don’t we use unadjusted reported capital as the value for AC (Available Capital)

  1. Incorporating these adjustments provides for a more economic and consistent view of capital available
35
Q

801

BCAR.CDN2018: All

Qz-3 net required capital:Identify the risk categories in the BCAR model

BICEP-FCR

A

801

BCAR.CDN2018: All

Qz-3 net required capital:Identify the risk categories in the BCAR model

BICEP-FCR

  1. asset risk:
    1. (B1) Fixed income securities
    2. (B2) Equity securities
    3. (B3) Interest rate risk
    4. (B4) Credit risk
  2. U/W/ risk:
    1. (B5) reserve risk
    2. (B6) premium risk
    3. (B8) Catastrophe risk
      . other risks:. (B7) Business risk
36
Q

802

BCAR.CDN2018: All

Qz-3 net required capital:What is the purpose of the covariance adjustment in the NRC formula

A

802

BCAR.CDN2018: All

Qz-3 net required capital:What is the purpose of the covariance adjustment in the NRC formula

  • Reflects the assumed statistical independence of 7 of the 8 risk components: (B1)-(B6) and (B8)
    1. (reduces NRC because it’s unlikely that these 7 components will be near their maximum levels simultaneously)
37
Q

803

BCAR.CDN2018: All

Qz-3 net required capital:Why is (B7), Business risk, excluded from the covariance adjustment

A

803

BCAR.CDN2018: All

Qz-3 net required capital:Why is (B7), Business risk, excluded from the covariance adjustment

  1. A.M. Best expects an insurer to maintain capital for business risks without the benefit of diversification
38
Q

804

BCAR.CDN2018: All

Qz-3 net required capital:In the BCAR model, what is ‘gross required captial’

A

804

BCAR.CDN2018: All

Qz-3 net required capital:In the BCAR model, what is ‘gross required captial’

  1. Gross required capital = direct SUM of required capital for (B1) through (B8)
  2. (represents total required capital if all risks developed simultaneously)
39
Q

805

BCAR.CDN2018: All

Qz-3 net required capital:Determine the A.M. Best rating based on the strength assessment table

A

805

BCAR.CDN2018: All

Qz-3 net required capital:Determine the A.M. Best rating based on the strength assessment table

  1. Click button with pencil
40
Q

806

BCAR.CDN2018: All

Qz-4 calculate (B5):What is the key idea in calculating the required capital for each risk category

A

806

BCAR.CDN2018: All

Qz-4 calculate (B5):What is the key idea in calculating the required capital for each risk category

  1. Multiply the liability from each risk category by a specific capital factor (similar to MCT)
41
Q

807

BCAR.CDN2018: All

Qz-4 calculate (B5):Briefly describe how BCAR ‘capital factors’ are derived

A

807

BCAR.CDN2018: All

Qz-4 calculate (B5):Briefly describe how BCAR ‘capital factors’ are derived

  1. Derivation of capital factors is:
    • Based on industry risk factors
    • Then adjusted for company’s volatility in case loss development
42
Q

808

BCAR.CDN2018: All

Qz-4 calculate (B5):Calculate B5 for BCAR for each VaR level

A

808

BCAR.CDN2018: All

Qz-4 calculate (B5):Calculate B5 for BCAR for each VaR level

  1. Click button with pencil
43
Q

809

BCAR.CDN2018: All

Qz-5 concepts:Identify considerations other than BCAR score that impact Best’s balance sheet strength assessment

Cured SALAMI

A

809

BCAR.CDN2018: All

Qz-5 concepts:Identify considerations other than BCAR score that impact Best’s balance sheet strength assessment

Cured SALAMI

  1. Q2 - SALAMI
    1. Q2 → Quality of capital, Quality of reinsurance
      1. –
    2. Stress testing (how well does the company perform under stress)
    3. Adequacy of reserves
    4. Liquidity of capital
    5. Actions of affiliates (affiliates could drag you down or pull you up)
    6. Matching of assets & liabilities (this is desirable for paying your bills on time)
    7. Internal capital models (does the company have a good procedure for assessing its own capital needs)
44
Q

810

BCAR.CDN2018: All

Qz-5 concepts:Identify the 6 steps in A.M. Best’s rating process (leading to the final issuer credit rating)

BOB-ECL (analyst for A.M. Best!)

A

810

BCAR.CDN2018: All

Qz-5 concepts:Identify the 6 steps in A.M. Best’s rating process (leading to the final issuer credit rating)

BOB-ECL (analyst for A.M. Best!)

  1. BOB-ECL
    1. Balance sheet strength (based mainly on the BCAR scores, but subject also subject to Cured Salami.)
    2. Operating performance
    3. Business profile
      1. –
    4. Enterprise risk management
    5. Comprehensive adjustment
    6. Lift and/or drag
45
Q

811

BCAR.CDN2018: All

Qz-5 concepts:Identify company characteristics that may tend to lower a company’s BCAR score

A

811

BCAR.CDN2018: All

Qz-5 concepts:Identify company characteristics that may tend to lower a company’s BCAR score

  • Aggressive investment portfolio (increases NRC for investment risk categories B1, B2, B3)
  • Loans to poor creditors or reinsurance with low-rated reinsurers (increases NRC for credit risk category B4)
  • Reserve deficiency (increases NRC for reserve risk category B5)
  • Excessive growth or high U/W leverage (increases NRC for premium risk category B6)
  • Concentration of property risks in Florida (increases NRC for catastrophe risk category B8)
46
Q

812

BCAR.CDN2018: All

Qz-5 concepts:Why does A.M. Best calculate NRC and BCAR at more than 1 level of VaR

insight, tail events

A

812

BCAR.CDN2018: All

Qz-5 concepts:Why does A.M. Best calculate NRC and BCAR at more than 1 level of VaR

insight, tail events

  • To gain more insight into the company’s balance sheet strength
  • To assess its ability to withstand tail events
47
Q

813

BCAR.CDN2018: All

Qz-5 concepts:Why does A.M. Best use a sensitivity analysis to supplement its BCAR calculation

A

813

BCAR.CDN2018: All

Qz-5 concepts:Why does A.M. Best use a sensitivity analysis to supplement its BCAR calculation

  • Assess capital required to support future business
  • Assess impact of a pro-forma transaction (acquisition of a subsidiary)
  • Assess projected year-end capital position
48
Q

814

BCAR.CDN2018: All

Qz-5 concepts:Identify an aspect of the BCAR model that may make it more robust than MCT

A

814

BCAR.CDN2018: All

Qz-5 concepts:Identify an aspect of the BCAR model that may make it more robust than MCT

  1. BCAR model permits qualitative adjustments to final assessment for economic conditions:
    • Interest rate changes
    • Stage of U/W cycle
    • Changes in reinsurance arrangements
49
Q

815

BCAR.CDN2018: All

Qz-6 BCAR vs MCT:Describe 3 similarities between the BCAR model and MCT

A

815

BCAR.CDN2018: All

Qz-6 BCAR vs MCT:Describe 3 similarities between the BCAR model and MCT

  • Purpose (assess financial strength and ability to meet policyholder obligations)
  • Key idea (apply capital factors to liabilities in various risk categories)
  • Covariance adjustment (to account for the statistical independence between risk categories)
50
Q

816

BCAR.CDN2018: All

Qz-6 BCAR vs MCT:Describe 3 differences between BCAR model and MCT

A

816

BCAR.CDN2018: All

Qz-6 BCAR vs MCT:Describe 3 differences between BCAR model and MCT

    1. formula is different and:
      1. †’ BCARmax = 100%, no minimum
      2. †’ MCTmin = 0%, no maximum
      3. robustness is different:
      4. †’ A.M. Best more robust because final assessment includes qualitative economic conditions
      5. (like stage of U/W cycle)
      6. time horizon is different:
      7. †’ BCAR capital must support current & future premium risk
      8. †’ MCT focuses more on current year’s risk
51
Q

817

BCAR.Cat: NEW

Qz-1 A (market overview):Why is cat loss a big threat to financial health

cats: SUR

A

817

BCAR.Cat: NEW

Qz-1 A (market overview):Why is cat loss a big threat to financial health

cats: SUR
1. Cats are (Significant, Unexpected, Rapid)

52
Q

818
E (2015.Spring 17a.) 0.500 pts

BCAR.Cat: NEW

Qz-1 A (market overview):Identify drivers for recent increase in frequency/severity of cats

A

818
E (2015.Spring 17a.) 0.500 pts

BCAR.Cat: NEW

Qz-1 A (market overview):Identify drivers for recent increase in frequency/severity of cats

  1. FREQUENCY: climate change
  2. SEVERITY: increase in population density & complexity of supply chains
53
Q

819

BCAR.Cat: NEW

Qz-1 A (market overview):Identify Best’s expectations for insurers accepting cat risks (2)

manage, absorb

A

819

BCAR.Cat: NEW

Qz-1 A (market overview):Identify Best’s expectations for insurers accepting cat risks (2)

manage, absorb

  1. Insurers must demonstrate ability to:
    • MANAGE cat risk
    • ABSORB potential losses
54
Q

820
E (2018.Spring 22a.) 1.000 pts

BCAR.Cat: NEW

Qz-2 B (ERM):Describe the elements of strong cat risk management (4)

A

820
E (2018.Spring 22a.) 1.000 pts

BCAR.Cat: NEW

Qz-2 B (ERM):Describe the elements of strong cat risk management (4)

  1. Catastrophe modeling:
    • Parameter selection is critical
    • Use more than 1 model
  2. Data quality:
    • Accurate property location & coding
    • Property value & insurance-to-value
    • Conduct site reviews (so that information is up-to-date)
    • Safeguards to prevent manipulation by customers
  3. Aggregate loss exposure:
    • Use aggregate losses as a secondary test of model
  4. Monitoring: (MML)
    • Measure, Monitor, Limit exposure on a continuous basis
55
Q

821

BCAR.Cat: NEW

Qz-1 C (B/S strength):What is a standard BCAR score

A

821

BCAR.Cat: NEW

Qz-1 C (B/S strength):What is a standard BCAR score

  1. A measure of an insurer’s financial strength (includes a component for catastrophes)
56
Q

822

BCAR.Cat: NEW

Qz-1 C (B/S strength):What is a stressed BCAR score

A

822

BCAR.Cat: NEW

Qz-1 C (B/S strength):What is a stressed BCAR score

  1. A score that reflects the ability of an insurer to continue operating even after a castastrophe
    • Based on natural catastrophe stress test
57
Q

823
E (2018.Spring 22c.) 1.000 pts

BCAR.Cat: NEW

Qz-1 C (B/S strength):Identify considerations in adjusting an insurer’s rating based on it’s stressed BCAR score

flexibility, volatility, multiple exposures, risk management

A

823
E (2018.Spring 22c.) 1.000 pts

BCAR.Cat: NEW

Qz-1 C (B/S strength):Identify considerations in adjusting an insurer’s rating based on it’s stressed BCAR score

flexibility, volatility, multiple exposures, risk management

  1. Financial flexibility:
    • Tolerance is HIGHER if the company is willing & able to replace capital after an event
  2. Historical volatility
    • Tolerance is LOWER if the company has as history of volatile operating performance
  3. Frequency of severe exposures
    • Tolerance is LOWER if the company has multiple exposures to severe events in a single season
  4. Risk management
    • Tolerance is HIGHER if the company has good/experienced risk management
58
Q

824
E (2017.Spring 23d.) 0.250 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength): what is the purpose of the A.M. Best natural catastrophe stress test

A

824
E (2017.Spring 23d.) 0.250 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength): what is the purpose of the A.M. Best natural catastrophe stress test

  1. Test financial condition of insurer after 2 major catastrophe events
59
Q

825
E (2016.Fall 21b.) 1.250 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength):Describe the steps in the natural catastrophe stress test

surplus, reinsurance, reserves, optional (adjust PMLs)

A

825
E (2016.Fall 21b.) 1.250 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength):Describe the steps in the natural catastrophe stress test

surplus, reinsurance, reserves, optional (adjust PMLs)

  1. [1] surplus
    • Reduce reported surplus by PML (net post-tax 1-in-100 year event)
  2. [2] reinsurance
    • Increase reinsurance recoverables by at least 40% of ceded PML
  3. [3] reserves
    • Increase reserves by 40% of net PML
  4. [4] optional
    • Adjust PMLs used in cat risk portion of standard BCAR score due to changes in reinsurance structure after 1st cat event
60
Q

826
E (2019.Spring 18c.) 0.500 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength):How do earthquakes impact BCAR surplus

A

826
E (2019.Spring 18c.) 0.500 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength):How do earthquakes impact BCAR surplus

  1. Reduce reported surplus by PML (net post-tax 1-in-100 year event)
61
Q

827
E (2018.Spring 22b.) 0.500 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength):Reason for testing a 2nd catastrophe event

A

827
E (2018.Spring 22b.) 0.500 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength):Reason for testing a 2nd catastrophe event

  • Insurer still has exposure aft after the first cat
  • Including a 2nd cat provides a better assessment of the insurer’s financial condition
62
Q

828
E (2015.Spring 17c.) 0.500 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength):Compare & contrast testing of cat risk: BCAR v DCAT

A

828
E (2015.Spring 17c.) 0.500 pts

BCAR.Cat: NEW

Qz-2 C (B/S strength):Compare & contrast testing of cat risk: BCAR v DCAT

  1. SIMILARITY: both test multiple events
  2. DIFFERENCE: BCAR tests 2nd non-concurrent event

6 (9 decks)

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