Chp 10

Question 1

1) Different parties involved in contract design and their needs

Answer 1

a) Clients – needs influenced by chosen market, capital available, expertise available
b) Client’s customers – needs influenced by capacity to pay, risks to be covered, benefits that are needed, attitude to financial risk
c) Actuaries – involved in initial costing of financial structures, provisioning
d) Lawyers – drafting of contracts supporting financial structures, thereby reducing exposure to risk
e) Accountants – proper accounts for income and outgo
f) Financial brokers – want regular reports demonstrating proper stewardship of finance provided
g) Administrators – administration of financial structures

Question 2

3) Examples of options and guarantees

Answer 2

a) Options: payment of premiums, benefits, use of contract proceeds, other items
b) Guarantees: guaranteed maturity value, guaranteed growth linked to specific index

Question 3

5) Range of options for financing benefits

Answer 3

Pay-as-you-go
Advance funding
Regular payments
Terminal funding
Just-in-time funding