Chapter 35 - Insolvency And Closure

Question 1

Insolvency of an insurance company

Rarely become insolvent because

Answer 1

Regulator monitors financial position of insurance companies
Regulation requires minimum level of solvency capital

Question 2

Insolvency of an insurface company

Seeious financial position, required to

Answer 2

Close to new business

Establish a recovery plan

Question 3

Insolvency of an insurface company

Issues addressed in model

Answer 3

Estimation of future post tax profits available to shareholders
Current value of all surplus assets
Amount and timing loan or debt redemption
Problems relating to industrial relations
Issues relating to any staff benefit schemes
Outstanding financial obligations, minority interest and tax

Question 4

Insolvency of an insurface company

Acquisition, consider

Answer 4

Location of operation
Integration of systems platform
Relocation of staff or adequate labor force
Effect on unit costs

Question 5

Closure of sponsored benefit scheme

2 types of closure

Answer 5

No new members, benefits continue to accrue for existing members
No new members, no further benefit accrual for existing members

Question 6

Closure of sponsored benefit scheme

Benefit scheme may cease due to

Answer 6

Insolvency of sponsor

Decision by sponsor to stop financing benefit provision

Question 7

Closure of sponsored benefit scheme

If scheme ceases level of benefits paid affected by

Answer 7

Rights of Beneficiaries
Expectations of Beneficiaries
Levels of assets

Question 8

Closure of sponsored benefit scheme

At time of discontinuance scheme may be

Answer 8

Under funded

Over funded

Question 9

Closure of sponsored benefit scheme

Scheme discontinued, following options for provisioning of outstanding benefits

Answer 9

Continuation of the scheme without further accrual of benefits
Transfer of liabilities to another scheme with same sponsor
Transfer of funds to beneficiary
Transfer of funds to an insurance company to invest
Transfer of the liabilities to an insurance company to guarantee the benefits
Transfer of the liabilities to a central discontinuance fund

Question 10

Insolvency of a bank

Answer 10

Unable to meet obligations to depositors and creditors

Value of assets falls below value of liabilities