Framework 5 Flashcards
Chapter 32 - Provisions
1 Define provisions
2 Reasons for calculating provisions (BAD MEDICS)
3 Individual vs global provisions
4 Risks requiring global provision
5 Bases
6 Factors determining strength of bases
7 Assets impacting valuation of liabilities
Factors to consider when valuing liabilities for:
8 - Published accounts
9 - Supervisory solvency
10 - Transfer of liabilities
11 - DB scheme contributions; trustees and members
12 - DB scheme contributions; sponsor
13 - setting an investment strategy
Basis to use when valuing liabilities for:
14 - Internal accounts
15 - Discretionary benefits and benefit improvements
16 - Discontinuance benefits
17 Setting a basis for individuals
Chapter 33 - Valuation of liabilities
1 Important factor in valuing assets and liabilities
2 Traditional discounted cash flow method
3 Drawbacks of DCF
4 Two definitions of fair value
5 Examples of straightforward fair value valuation of assets
6 Difficulty of valuing liabilities using fair value
7 Mark-to-Market method
8 Bond yield plus risk premium method
9 Asset-based discount rate approach
10 Risk -neutral market consistent valuation
11 Valuing guarantees
12 Valuing options
13 Option exercise rate and reasons for not exercising options that are in the money
14 Allowing for risk in cash flows
15 Allowing for risk in cash flows using market consistent method
16 Establishing provisions - general insurer
Chapter 34 - Reporting results
1 Changes in accounting standards and impact of using market values for liabilities/ assets 2 Accounting concepts (CMG BRAMDM PC) 3 Analysing accounts 4 Reports accompanying accounts (CIRCUS) 5 Accounting ratios for general insurer
To members of schemes, by sponsors:
6 - Importance of disclosure (SIMMERS)
7 - Timing of disclosure (PRICE)
8 - Info to be disclosed (SCRIBE)
9 Common aims of accounting standards (CARD)
10 Info required to be disclosed by owners of benefit schemes (DIM CLAIMS)
Chapter 35 - Insolvency and closure
1 Reason insurers rarely become insolvent
2 Changes in expenses of an insurer closed to new business
3 Issues to consider when an insurer is facing insolvency
4 Issues to consider when acquiring an insolvent insurer
5 Provision of benefits of an insolvent insurer
6 Types of benefit scheme closure and the effect on sponsor contributions and what the decision depends on
7 Provision of benefits of a discontinued scheme
8 Deficit on discontinuance
9 Surplus on discontinuance
10 Provision of benefits of a discontinued scheme
11 Issues to consider when deciding on method for provision of benefits on discontinued scheme
Chapter 36 - Capital management
1 Capital management
Need for capital: 2 - Individuals 3 - Trading companies 4 - Benefit providers (REG CUSHION) 5 - State
Sources of capital:
6 - Mutual
7 - Proprietary
8 - Benefit scheme
9 Capital management tools
Capital management tools acting as a source of capital: 10 - Reinsurance; proportional and financial reinsurance 11 - Securitisation 12 - Unsecured debt 13 - Banking products 14 - Derivatives 15 - Equity 16 - Internal sources of capital
Chapter 37 - Capital requirement
1 Types of assessments of capital
2 Regulatory capital
3 Liabilities covered by provisions
4 Solvency capital requirement
5 Provisions vs additional capital requirement
6 Disadvantages of calculating a prudent provision and using simplistic form of solvency capital requirement
7 Solvency II and pillars
8 Levels of capital requirement under solvency II
9 Ways to calculate SCR
10 Calculating standard formula SCR
11 Advantages and disadvantages of SCR standard form
12 Other uses of internal model either than SCR
13 Purpose of the Basel accord
14 Economic capital
15 Starting point for assessing economic capital
16 Market value of assets and liabilities
17 Components of profit for a provider
18 Meaning of cost of capital
Chapter 38 - Surplus and surplus management
1 Surplus and surplus arising
2 Reasons for analysing surplus (DIVERGENCE)
3 Importance of analysing surplus periodically
4 Projecting expected experience in an analysis of surplus
5 Isolating impact of sales and mortality in an analysis of surplus
6 Sources of surplus
7 Levers of surplus
8 Controlling claim frequency
9 Controlling claim amount/ benefit
10 Controlling expenses
11 Increasing renewals and decreasing withdrawals
12 Decreasing investment return deficit
13 Tax efficient policy
14 Issues to consider when determining amount of surplus to distribute in a life insurance company
15 Uses of surplus in a benefit scheme
16 Issues to consider when a DB pension distributes surplus
Chapter 39 - Monitoring
1 Reasons for monitoring 2 Data requirements for monitoring 3 Monitoring for demographic factors 4 Monitoring for economic factors 5 Caution with results of monitoring exercises
