Glossary Flashcards
Yes, you do need to study the glossary in CA1. I have even come across entire questions in fellowship papers that are built around a single glossary definition (lookup "protected NCD" in ASSA's F103).
Define
Accrual rate
The rate at which rights build up
… for each year of service
… in a defined benefit scheme.
Define
Accrued benefits
The benefits for service up to a given point in time,
… whether vested rights or not.
They may be calculated in relation to current earnings or projected earnings.
Define
Accumulation of risk
Occurs when a portfolio of business contains
… a CONCENTRATION OF RISKS
that might give rise to EXCEPTIONALLY LARGE LOSSES
… from a single event.
Such an accumulation might occur by
- location or
- occupation.
Define
Acquisition costs
Costs arising from the writing of insurance contracts including:
DIRECT COSTS, such as
- – acquisition commission or
- – the cost of drawing up the insurance document or
- – including the insurance contract in the portfolio.
INDIRECT COSTS, such as
- – advertising costs or
- – the actuary’s/underwriter’s expenses connected with the establishment of the premium rating table.
Define
Active member
A member of a benefit scheme who is
at present ACCRUING BENEFITS under that scheme
in respect of CURRENT SERVICE.
Define
All risks
A term used where the cover is not restricted to specific perils such as fire, storm, flood etc.
The cover is for - loss, - destruction or - damage by ANY PERIL not specifically excluded.
The exclusions will often be inevitabilities such as wear and tear.
The term is sometimes loosely used to describe a policy that covers a number of specified risks, though not all.
Define
Anti-selection
People will be more likely to take out contracts when they believe their risk is higher than the insurance company has allowed for in its premiums. This is known as anti-selection.
Anti-selection can also arise where existing policyholders have the opportunity of exercising a guarantee or an option. Those who have most to gain from the guarantee or option will be the most likely to exercise it.
Define
Arbitrage
The simultaneous buying and selling
… of 2 ECONOMICALLY EQUIVALENT
… but DIFFERENTLY PRICED portfolios
so as to make a RISK-FREE PROFIT.
Define
Average earnings scheme
a benefits scheme where the benefit for each year of membership is related to the pensionable earnings for that year.
Such schemes are alternatively referred to as career average schemes.
Define
Balance of cost scheme
A defined benefits scheme to which beneficiaries make a defined contribution and the main sponsor pays the remainder of the unknown cost of providing the benefits.
Define
Bear market
A period of time during which investors are generally unconfident and stock market prices decline.
Define
Benchmark
A standard or model portfolio against which a fund’s structure and performance will be assessed.
Define
Best estimate
An actuarial assumption which the actuary believes has
an equal probability
of under- or overstating future experience.
Define
bid price
The price at which a market maker offers to BUY a security.
The price at which the manager of a unitised financial product is prepared to buy back units from an investor.
Define
Break-up basis
A valuation basis that assumes that
- the writing of new business ceases and
- cover on current policies is terminated.
In relation to general insurance policies, current policyholders would normally be entitled to a proportionate return of the original gross premium.
Deferred acquisition costs would probably have to be written off.
Also known as a wind-up basis.
Define
Bond
A bond is a form of loan.
The holder of a bond will receive
- a lump sum of specified amount at some specified future time together with
- a series of regular level interest payments until the repayments (or redemption) of the lump sum.
Define
Book reserve
A provision in a company’s accounts for a future benefit liabilities for which NO FUNDS have been SET ASIDE.
Define
Bulk transfer
The transfer of liabilities (and usually assets) relating to a group of members, from one benefit scheme to another.
Define
Bull market
A period of time during which investors are generally confident and stock market prices increase.
Define
Call option
the right, but not the obligation, to buy a specified asset on a set date in the future for a specified price.
Define
Cancellation
A mid-term cessation of a general insurance policy that may involve a partial return of premium
Define
Cap
An upper limit.
Define
Catastrophe
A SINGLE EVENT that gives rise to exceptionally large losses.
The exact definition often varies and is often dependent on excess of loss wordings.
Define
Catastrophe reserve
A reserve built up over periods between catastrophes to provide some contingency against the risk of catastrophe.