Miscellaneous Flashcards
Identify a place on Statutory Annual Statement for uncollectible reinsurance
There is no uncollectible reinsurance on AS
Identify a place on Statutory Annual Statement for provision for reinsurance
Liabilities of Balance Sheet and Sch. F part 3
How are Salvage & Subrogation treated in Schedule P part 1?
paid losses are always net of S&S; unpaid losses may be recorded net or gross of anticipated S&S
Earned Premium formula
Written Premium - Change in Unearned Premium
Paid-in capital
Paid-in capital (or contributed capital) is that section of stockholders’ equity that reports the amount a corporation received when it issued its shares of stock.
Describe how Schedule F reflects uncollectible reinsurance
Sch. F uses a formula to develop the provision for reinsurance, which is a prospective measure of uncollectible reinsurance
how to allocate PHS for LOB when calculating investment gain allocated to LOB
% of (Curr Yr EP + Mean L&LAE reserve + Mean UEPR) of each line to total * annual average PHS
IEE: Total investable asset formula
Total Investable Asset = Mean L&LAE Reserve + Mean UEPR + Mean Reinsurance Payable - Mean Agent’s Balances + Mean PHS
Justify a method for allocating surplus that addresses how IEE allocates it.
- allocate surplus based on internal model
- allow the company to judgmentally allocate any additional surplus that is deemed appropriate after the formulaic value
- Use prospective pricing models to assess riskiness
& cost of capital. This better reflects risk than just using premium & reserves
Required method recording WP and one exception
WP should be recorded on the effective date of the policy. Except, Worker’s Comp, where the premium is billed at the time of installment payments
Joint and Several Liability
joint and several liability则为“连带负债”，指债权人可就两个以上债务人所欠的债务同时对所有债务人提起诉讼，也可单独就其中某一债务人提起而要求他（她）归还所有其他人所欠债务，一旦归还，其他债务人也就免去自己的债务
For RBC- R4 Reserve risk, how’s the loss and LAE reserve discounted?
Just as Sch. P part 1, net of tabular, gross of non-tabular
For RBC- R4 Reserve risk, when should not the company adjustment be made?
- either the initial or current loss values are negative for any years
- current value is 0 for any year in the past 10 years (aka. have to have at least 10 years loss&lae data to be qualified)
- sum of initial values is 0 across all years
What the R4 - reserving risk charge is designed to measure?
it’s designed to measure the susceptibility to adverse development
Adverse loss development
Increase in loss reserves. For example, last year’s loss reserve was 10,000. with an adverse loss development of 1,000, this year’s loss reserve will be 11,000
Premium Deficiency Reserve
Disclose in Financial Statement the size of the deficiency and whether investment income was considered
Briefly describe MMSEA 2007
Claimant must submit claim details to CMS, and insurer need to verify that the claim was Medicare eligible
True or False: a company must be declared insolvent before the guaranty fund may have any involvement?
False
True or False: A majority of the states use a pre-fund assessment
False
True or False: The law gives guaranty funds priority treatment in recovering their costs from the insolvent insurer
TRUE
Balance Sheet is on a Net basis?
True
Describe the objectives and focus of SAP and GAAP
SAP is used for regulators, it’s based on the liquidity and focus on Balance sheet. GAAP’s intend users are investors, it’s on-going concern and focus on income statement.
Amortized Cost vs. Fair Value
Amortized cost is based on the book value on the balance sheet. Fair value equals the remaining cash flows discounted at current market interest rates.
Materiality
A material item is one that is large enough that the users of the information will be influenced by it.
(less testable) sources for preparing and issuing statutory financial statements for insurance companies in the US and guidance if resources are not available
two resources: SSAP, NAIC’s APPM
if not available: SSAP, Emerging Accounting Issues Working Group, NAIC AS Instructions, Certain GAAP publications (in that order)
One way to critique a potential materiality standard
Materiality standard varies by task.
Eg: we may have the same reserving or pricing standards across LOBs, yet we def. won’t have the same standard to set pricing and reserving for even the same LOB
Examples for Discounting Rate (ASOP 20)
- Risk Free: use a rate close to risk free rate (i.e. low investment risk and similar timing)
- Portfolio: anticipated return on a selected asset portfolio
- Discount rates requested by another party
Briefly describe the relationship of insurance commissioners to the NAIC
Commissioners are members of NAIC (National Association of Insurance Commissioners)
Define “Price Elasticity of Demand”
Change in consumption of a product related to change in price. Consumers with lower price elasticity are likely to stick around even with larger fluctuation in prices
Define Captives
Self-insurance. Parent company creates a company only to provide insurance coverage for itself. Group captive is owned by a group of companies (usually in similar business).
Captives needs a fronting paper from parent company in its rate filing and AS.
Captives vs RRG
https://lpinsurance.com/blog/risk-retention-or-captive/
Surety
A surety company focuses on helping contractors and other business owners get bonded.
How GAAP vs. SAP treats reinsurance?
[this means unauthorized reinsurance sometimes]. SAP has provision for reinsurance to measure the recoverable that may not be collectible. GAAP relies on management estimates.
define Unauthorized reinsurance
reinsurance purchased from a provider that is not licensed in the insurer’s state of domicile
Goodwill
(Asset) .the difference between the purchase price of a company and its book value
Defined Tax Proration
25% tax-exempt income need to keep for tax accounting
Special Surplus
A part of surplus, although not recognized as Unassigned Funds (used for stock div distribution). Major representative: retroactive reinsurance gain (when consideration paid < reserve ceded). This is the few places where SAP is less conservative than GAAP as it still recognizes this gain as a part of Surplus.
2 types of reinsurance contracts that may cover liabilities that occurred prior to the effective date of the contract, but are accounted for as prospective reinsurance?
Structured Settlement
Novation - the primary company’s liabilities completely extinguished
Reinsurance of a Claims Made policy (after retroactive date, but before the effective date of the contract)
Define a Commutation
an agreement between ceding and reinsurer that provides valuation, payment, and discharge of obligations from both parties under a certain reinsurance contract
