deck_47571 Flashcards
Final Anagrams
4 aims of regulation
CRIPConfidence to financial systemReduce financial crimeInefficiency correctionProtection of customers of financial products
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What are the 5 types of regulatory regime?
SS VUMSelf regStatutoryVoluntary cocUnregulatedMixed
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Explain an Ivestment trust in 3 points (shares or units, closed ended or open, buy/sell from investor or manager)
S,CE,Inv, discount to NAV, company law
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Explain an unit trust in 3 points (shares or units, closed ended or open, buy/sell from investor or manager)
U,oe,man, equal to NAV, trust law, bid/offer spread
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Explain an OEIC in 3 points (shares or units, closed ended or open, buy/sell from investor or manager)
S, oe, man, company law, lower charges, 1 buy/sell price
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What is the formula for the real WACC?
debt/(debt+eq)Gross cost of debt(1-t) + equity/(debt+equity)*cost of equityFractions reflected optimal capital structureGCoD=return on IL bonds+Corp Bond RPCoE=return on IL bonds+ERPt=assumed corporation tax rate
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What are the assumptions underlying the discounted dividend model?
D, an annual dividend first paid at time 1i, constant effective annual required rate of returng, constant effective annual rate of divdiend growthi>gi, g both real or both nominaltaxes and expenses ignoredDividends are reinvested at rate iShare held in perpetuity
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4 Factors effecting demand for assets
PIA-RRRRRRRRRRPreferencesIncomeAlternativesRisk/Return
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Why prefer a lower yield?
TIMETaxInvestments deal less frequently, so less costMatchingExpected returns higher, longer DMT
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Problems with immunisation
Fixed liabilitiesSmall profitsFlat yield curveConstant rebalancingTaxes/dealing costs ignoredSuitable assets may not existIf timings of cashflows are unknown we can’t do it
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Why might past data be useless?
BEACHESBalance of homogeneous groups changedExperience changesAbnormal fluctuationsChanges in how data was recordedHeterogeneity in group we’re applying assumptions toErrors in the dataStatistically random fluctuations
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6 methods of financing a benefit scheme?
PAST JUGULARPAYGSmoother PAYGTerminalJust in timeReGULARLums sum in advance
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How do you appraise a financing method?
DR FLOSSDurabilityRealismFlexibilityLiquidtyOpportunity costStabilitySecurity
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Reasons to calculate liabilities
IP MAD DOGSInvestment strategyPremium settingMandA’sAccounts (published and internal)Discretionary beenfits Discontinuance benefitsOption termsGtee costsStatury valn
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What are the sources of surplus?
CAMBODIAChanges in assumptions/legislationA reclaculationModified conribution rateBulk transfer of liabilitiesOptions taken upDiscretionary benefitsInterest on surplusActual not equal to expectedErrors
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What 3 things must you have to be insurable
P/h has interest in the riskFinancial and quantifiable natureAmount paid by insurer relates to the financial loss incurred
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What 6 other things would you like in an insurable risk
MUDPISMoral hazard avoidedUltimate limit to liabilityData to price the riskPooling of similar risksIndependant risk eventsSmall probability of occuring
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What are the risk managemnt tools?
MURDAManagement and control systemsUnderwriting and claims controlReinsuranceDiversificationART
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What management control systems are there?
Special DAMSData checksAccounting/auditMonitor liabilitiesSpecial care on Options/Gtees
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3 types of underwriting
MILFMedicalLifestyleFinancial
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4 possible stages of underwriting?
Proposal formDr reportMedical examSpecilist tests
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4 types of claims control
CLEOClaim formLoss adjustEstimatesOngoing checks
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3 headings of reinsurance, split first into 2, second into 4 and the last explain
Proportional, NP, FinancialProportional:Quota shareSurplusNPRisk XLAgg XLCAT XL Stop lossFinancial - reinsurance to improve solvency position, regulatory arbing
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Reasons to reinsure
SAD LIFESmoothingAvoid large lossesDiversifyLimit exposure to single risks/accumulationsIncrease NB capictiyFinancial assistance (NB, solv)Expertise e.g. data/pricing
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Types of ART
DIPSISDisc coverIntegrated risk coverPost loss fundingSecuritisationInsurance derivSwaps
