Chapter 13: Ongoing solvency

Question 1

1. PURPOSE

Question 2

A life insurer will need capital for: (8)

Answer 2

1. Providing protection against adverse experience
2. Funding new business
3. Supporting a riskier investment strategy
4. Funding overheads and development costs
5. Acquiring other companies and or blocks of business
6. Satisfying solvency valuation requirements
7. Supporting with-profits bonuses and their smoothing
8. Providing day to day working capital

Question 3

The main components of the SCR consist of: (4)

Answer 3

1. The Basic SCR (BSCR)
2. Operational Risk
3. Participations
4. Adjustments

Question 4

The BSCR consists of: (3)

Answer 4

1. Market Risk
2. Life Risk
3. Non-life Risk

Question 5

Under the BSCR the Market risk component consists of: (6)

Answer 5

1. Interest Rate risk
2. Equity risk
3. Property risk
4. Spread and default risk
5. Currency risk
6. Concentration risk
7. Illiquidity risk
8. AdjSES

Question 6

Under the BSCR the Life Risk component consists of: (7)

Answer 6

1. Mortality risk
2. Longevity risk
3. Disability/ Morbidity risk
4. Lapse risk
5. Expense risk
6. Retrenchment risk
7. Catastrophe risk

Question 7

Under the BSCR the Non-life Risk component consists of:

Answer 7

1. Premium and reserve risk
2. Lapse risk
3. Catastrophe risk