CH 0 ACC

Question 1

Problem solving: processes involved

Answer 1

DEFINE problem
DESIGN IMPLEMENT solution
MONITOR effectiveness REVISE

Question 2

What makes ACC Actuarial

Answer 2

• Estimation future unknown events
• Long term horizon
• Recognise stakeholder needs and risk profiles
• Decisions made in ST in light of likely future outcomes
• Models used to represent future outcomes
• Assumptions based on historical evidence
• Allow for GBE
• Interpretation of modelling results, develop strategies
• Monitoring experience
• Modifying models in light of experience
• Application personal judgement

Question 3

List areas ACC used

Answer 3

• Risk management and investment
• Asset liabilioty management
• Level of solvency/profit. Estimate future solvency
• Need/calculations of provisions
• Contributions/premiums so benefits payable on future events
• Monitor mortality, expense assumptions for schemes, reserving for contracts
• Monitor effect of investment mismatching

Question 4

Describe 5 processes of ACC

Answer 4

General economic and commercial environment
Specify the Problem
Develop the solution
Monitor the experience

Question 5

General economic and commercial environment

Answer 5

CREATE GREAT LISTS
Is there a need for product 
Capital available 
Investments available
Risk appetite 
Reinsurance available

Question 6

Specifying the problem

Answer 6

Details/features of product in question
Objectives
Stakeholders, their needs, risk appetite
Identify risks
Strategies for risk management (manage, mitigate, transfer)
Option for design of solution

Question 7

Designing Solution

Answer 7

Examine models in use/adjust
Select model most appropriate/ construct new (eg profit testing) 
Assumptions, sensitivity testing
Run model, interpret results
Implication of results on stakeholders
Determine proposed solution and alternatives
Formalise proposal 
Communicate

Question 8

Monitoring experience

Answer 8

Models must be dynamic and reflect current experience
Monitor experience, update investigation
Analyze individual components, how actual compares to assumed
Use up to date info, revise assumptions
ID causes of departure, how likely to happen again
How regularly to monitor
Refine solution - feed back into cycle.

Question 9

Professionalism

Answer 9

Compliance with relevant regulation
Professional guidance
Demonstrated throughout ACC

Question 10

Give ways of mitigating risk

Answer 10

Avoid
Accept and minimise
Share
Transfer

Question 11

What are the two main occurances of risk and types of risk causing

Answer 11

1. Value of asset/asset proceeds not as expected:
   - market risk: risks related to changes in investment mkt values
   - Credit risk: risk of third party failure to repay debts
2. Value of liabilities/ liability outgo not as expected
   - Inflation risk: real liabilities > expected
   - Underwriting risk: insurer takes on risk at inadequate price
   - Insurance risk: more claims due to higher mortality or morbidity rates
   - Exposure risk: more claims from specific events due to inadequate diversification in portfolio
   • Finance risk: not obtain finance or at anticipated cost
     - External risk: risk due to external events like change in legislation
     - Operational risk: fraud/mismanagement within organization causing loss

Question 12

How is risk measured

Answer 12

Prob*Impact
Reaction of stakeholders: varies due to risk appetite (age wealth and dependants) and objectives (eg charity vs investing in forest: high income)