Framework 4

Question 1

Chapter 25 - Risk governance

Answer 1

1 Risk control cycle stages
2 Risk identification
3 Risk classification
4 Risk measurement
5 Risk control
6 Risk financing
7 Risk monitoring
8 Benefits of risk management (SAMOSA)
9 Objectives of the risk management process
10 Example of a portfolio effect/ hedge
11 Risk vs uncertainty
12 Systematic risk and diversifiable risk
13 Classification of a fall in equity market
14 Managing risk at the business unit level
15 Benefits of enterprise risk management (disadvantages)
16 Stakeholders in risk governance

Question 2

Chapter 26 - Risk identification and classification

Answer 2

1 Identifying risks associated with a project
2 Categories of risk that could be used in a risk matrix for a typical project (PNEFCPB)
3 Wider risk identification techniques
4 Define risks faced by an insurance company
5 Market risk subdivisions
6 Constraints on perfect asset-liability matching (Same as CH16 card 20 - pure matching not possible)
7 Examples of credit risk
8 The security of a debt and of the borrower
9 Definition of a credit rating
10 Define a liquid asset
11 Reason banks are exposed to significant liquidity risk
12 Examples of business risks
13 Examples of operational risks
14 Identifying and analysing operational risks
15 Examples of eternal risks
16 Non-business risks for an insurance company

Question 3

Chapter 27 - Financial product and benefit scheme risks

Answer 3

1 Risks to a beneficiary
2 Risk to the state in relation to benefit provision
3 Key benefit risks when benefits are known in advance
4 Key benefit risks when benefits are not known in advance
5 Mitigating annuity rate risk for defined contribution
6 Effects of sponsor/provider actions on benefit uncertainty
7 Key contribution risks in a defined benefit scheme
8 Key contribution risks in a defined contribution scheme
9 Operational and external risks to a benefit scheme
10 Causes of inappropriate advice in relation to benefit provision (CRIMES)
11 Investment risks associated with a financial product
12 Define sponsor covenant
13 Key business risks for life insurance companies
14 Key business risks for general insurance companies
15 Relationship between expense, persistency and new business volume risks
16 New business volumes risks
17 New business mix risks

Question 4

Chapter 28 - Accepting risk

Answer 4

1 Quantifiable risk appetite statement
2 Factors influencing risk appetite
3 Market for risk
4 Risk efficient market for risk transfer
5 Examples of different risk appetites in an insurance context
6 CIS as risk transfer
7 Risk and product design
8 Insurable risk
9 Risk pooling
10 Additional Insurable risk (MUD PIS)

Question 5

Chapter 29 - Risk measurement and reporting

Answer 5

1 Subjective assessment of risk exposure
2 Model assessment of risk exposure
3 Ways to evaluate risk
4 Scenario testing for operational risk
5 Examples of operational risk categories
6 Stress testing and methods
7 Stress scenario model
8 Reverse stress test
9 Stochastic model to evaluate risk
10 Making stochastic modelling practical
11 ‘1 in 200’ event
12 Overall and individual capital risk requirement
13 Examples of correlation
14 Aggregating partially dependent risks
15 Copulas
16 Liability risk measurement
17 VaR
18 VaR drawbacks
19 TVaR
20 Risk portfolio
21 Reasons for risk reporting (FRAUD CRIME)
22 Reasons for consistent risk reporting in ERM
23 Two-tier model for determining capital to be held
24 Risk based capital requirements

Question 6

Chapter 30 - Risk transfer

Answer 6

1 Responses to risk (PIRATE)
2 Evaluation of risk mitigation options
3 Factors to consider when deciding to transfer or retain risk
4 Costs and benefits of reinsurance
5 Reasons for reinsuring
6 Reinsurance contract variations
7 Proportional reinsurance
8 Quota share
9 Advantages and disadvantages of Quota share
10 Surplus reinsurance
11 Examples of fixed and varying retention level
12 Advantages and disadvantages of surplus reinsurance
13 Non-proportional reinsurance (XL)
14 Types of excess of loss reinsurance
15 Risk XL vs Surplus
16 Uses of excess of loss
17 Factors when deciding on reinsurance products to use
18 Alternative risk transfer (ART)
19 Integrated risk cover
20 Securitisation
21 Post loss funding
22 Swaps
23 Insurance derivatives
24 Reasons for ART (DESCARTES)

Question 7

Chapter 31 - Other risk controls

Answer 7

1 Risk management controls besides reinsurance and ART
2 Diversification of reinsurance business
3 Reciprocal quota share reinsurance over a wider range of contracts
4 Underwriting
5 Reasons for underwriting (SAFARI)
6 Types of underwriting
7 Assessing evidence of medical underwriting
8 Investigated factors in lifestyle underwriting
9 Financial underwriting and info used
10 Six possible actions from underwriting
11 Claims control systems
12 Examples of claims control systems
13 Balancing cost and benefits of claims control in general insurance
14 Income protector insurance rehabilitation
15 Management control systems used to reduce risk
16 Managing investment risk associated with options and guarantees
17 Dealing with low probability, high impact risk events
18 Assessing capital to retain for risk
19 Total cost of risk