Exam Insights

Question 1

What contracts will be included in covered business and what contracts won’t: (3)

Answer 1

Covered business includes any contracts that are regarded by the regulator as long-term insurance business, but some long term insurance contracts can be excluded, it needs to be clearly disclosed

Parent companies and asset management companies will not be included as covered business

Health companies (doing risk uw and health admin) may be included or excluded, depending on the regulatory framework that applies in a particular country

Question 2

Define an orphan estate:

Answer 2

It is the excess of the market value of assets over the aggregate asset share of all in force policies.

The market value of assets needs to exclude shareholder assets

For non-profit business, the statutory liabilities can be used as a proxy for their asset share

Question 3

Points to discuss when describing the features of risk products in SA:

Answer 3

1. Term
2. Cover (stand alone, accelerator, surrender benefits)
3. Premiums
4. Cover amount
5. Guarantees and options (future cover option, prm guarantees)

Question 4

Define pillar 1 of SAM:

Answer 4

It sets out the quantative regulatory requirements that insurers need to comply with.

At a high level, it requires insurers to determine their balance sheet and capital requirements on a SAM basis, which are used to determine their financial soundness from a regulatory perspective

Question 5

Define pillar 2 of SAM

Answer 5

It deals with the qualitative requirements and rules on supervision of insurers.
It aims to establish a system of sound governance and risk management

Question 6

Define pillar 3 of SAM:

Answer 6

It sets out the supervisory reporting and public disclosures required by insurers.
Insurers will have to disclose private information to the PA and public information to the market

Question 7

Define new business profit margin:

Answer 7

It is defined as the ratio of value of new business (VNB) to present value of new business premiums (PVNBP)

Question 8

TCF outcomes that should be demonstrated: (6)

Answer 8

1. Customers are confident that they are dealing with firms where the firm treatment of customers is central to the firm’s culture
2. Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly. (Applies to new business only)
3. Customers are given clear information and are kept appropriately informed before, during and after the time of contracting
4. Where customers receive advice, the advice is suitable and takes account of their circumstances
5. Customers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and what they have been led to expect
6. Customers donnotbface unreasonable post-sale barrier to change products, switch provider, submit a claim, or make a complaint