Ch14: Risk (2)

Question 1

New business mix risk

Answer 1

1. by nature and size
2. by source

Question 2

Why directors may not follow actuary’s advice

Answer 2

• for competitive reasons
• due to strategic company goals such as maximising new business volumes or funds under management
• so as to maximise shareholder earnings

Question 3

Risks from actions of distributors

Answer 3

• encourage business to lapse and re-enter where there is no clawback commission payments
• taking advantage of loopholes in product design
• taking advantage of opportunities that arise due to timing effects in unit pricing practices

Question 4

Examples of counterparty default

Answer 4

• reinsurance agreements
• outsourcing arrangements
• corporate bonds held as investments
• distribution arrangements