Mnemonics Flashcards
Surplus Distribution Considerations
(SAD PENIS)
Shareholder split - how it will split the bonus between shareholders and policyholders
Afford - How much can it afford to distribute
Divide - How it will divide surplus between different groups of policyholders
PRE - Meet PRE
Equity - Satisfy requirements for equity between different groups of policyholders, including different generations
New business plans, investment strategy, solvency - not interfere
General Business Environment
(FEEL RIPD)
Fiscal Regime
Expenses + Commissions
Economic Environment
Legal Environment
Regulatory Regime
Inclination to buy life insurance
Professional Guidance
Distribution channels (their effect)
Risks to consider - General
(COMEDIC CRAMP COW MF)
Competition
Other data
Mortality
Expenses
Distributors
Investment return
Claims experience for health and care products
Credit failure
Regulatory changes - legal and fiscal
Aggregation of risk
Mix of business - nature, size, source, volume
Policy data
Counterparties
Options and guarantees
Withdrawals
Management of the company
Fraud
Product Cycle
(MUD PEC V)
Marketing and Sales
Underwriting
Design
Pricing
Experience Analysis
Claims Management
Valuations
Regulatory Regime (Restrictions on life insurance companies)
(PAST DUC)
Premium rates or charges - restrictions
Assets - type/amount
Solvency requirements - indirect restriction through higher solvency margins
Terms and conditions - restrictions on contracts
Distribution channels - channels that can be used, sales processes and marketing literature
Underwriting - avoid discrimination
Contracts - types of contracts the insurer can offer
Contract design factors
(AMPLE DIRECT FACTORS)
Admin
Marketability
Profitability
Level and form of benefits
Early-leaver benefits
Discretionary benefits
Interests and needs of customers
Risk appetite of parties involved
Expenses vs charges
Competition
Terms and conditions
Financing requirements (capital requirements)
Accounting implications
Consistency with other products
Timing of premiums
Options and guarantees
Regulatory requirements
Subsidies - cross
ORSA and SRP
(RACO TRUCA C I GOT U)
ORSA: main purpose is to determine the amount of capital required to ensure future solvency and to meet the needs of the business plans. Forward looking, risk based own risk and solvency assessment.
Resilience of insurer’s solvency under various stressed scenarios
(Appetite) - The solvency needs given the risk profile, Appetite and business strategy
Compliance with financial soundness principles
(Own) - Differences between the Own view of risks versus the prescribed requirements
Time horizon - longer than prescribed FSI and aligned to business planning
Risk profile changes materially - must consider doing the ORSA
Use test - widely used and embedded into the risk management of the company
Consistent with complexity of risks and operations of the company
Again submit if PA not happy
SRP: Identify, assess, monitor, manage the risks the insurer faces. Greater confidence in overall solvency position.
SRP considers the:
Capital requirements
Investment rules
Governance and risk management
Own funds
Technical provisions
Use of internal and partial models
ORSA Report Contains
(PAM BEM)
Projected capital over the business planning period
Actual vs planned capital from previous ORSA report
Material changes to the ORSA
Breakdown of capital usage over the planning period
Expected changes to the risk profile
Methodology used i.e. stress tests, scenario analysis
Reasons for EV
(ME CAR SUV)
Tells you everything over and above the AoS (which is the change in ANW), specifically:
New business strain vs value of new business.
Discretionary margins -> EV tells full picture.
Where experience over reporting period has an impact on required capital (and hence CoRC).
Reasons:
(Management) - To improve managements understanding of the business
(Executive) - Assist with exec remuneration schemes
(Checks) - assist with checks
(Assumptions) - set assumptions
(Realistic) - Provide investment analysts with more realistic picture
(Sources) - Identify individual sources of EV profit/loss -> management actions
(Unprofitable) - Identify unprofitable contracts
(VNB) - to share with management
Policyholder Protection Rules
(P3T COM)
24 rules but these are the main ones:
Product design
(Premiums) - Determining
Premium Reviews
TCF
Credit Life Insurance
Negative Option Selection of Policy T&Cs
Micro insurance and funeral products
TCF Outcomes
(PAM CIN)
Post sales
Advice
Marketing/PRE
Culture
Information
Needs
HAF Responsibilities
(MADAME JURA The FSP)
The HAF is responsible for expressing an opinion to the board of directors on the TPs, MCR and SCR incl.:
Models used (appropriateness and methodologies)
Assumptions (BEs and others when calculating the TPs)
Data (Sufficiency and quality -> credibility)
Accuracy of the calculations - do they reflect the risks of the business
Management action impacts (how they could impact assumptions?)
Experience analysis and where they differ
Judgement and the expert use of it e.g any material judgement that could impact the TP, MCR, SCR -> contract boundary definition
Underwriting policy
Reinsurance and other risk transfer policies
Asset liability management policy
Transactions (opinion on significant transactions i.e. mergers)
Financial position - incl impact of any shareholder distributions of profit allocations
Shareholder distributions - impact on SCR
Profit allocations - advice on awarding bonuses to policyholders
Product Development + Design (advice on premiums etc.)
Principles for calculating the TPs in SAM
(THuMB PRinT)
TP must correspond to the current value of the insurance obligations
Homogeneous - segment insurance contracts into homogeneous groups
Methods - actuarial and statistical methods that are proportionate to the nature, scale and complexity of the risks
Best estimates - TP must include a BE and RM. Under certain scenarios can be calculated as a whole.
Proportionality - Can use simplified methods to calc but must satisfy proportionality
Reinsurance - calc it gross of reinsurance
Time value of money must be allowed for (risk free rate)
Important Regulations (in LTIA) to remember
Limitation on remuneration to intermediaries:
Reg 3A: All policies UW < 2009 (Comm Table).
Reg 3B: Investment policies UW >2009 (Comm Table).
Minimum values where contractual changes are made to savings policies.
Reg 5A: All policies where savings is main component
Min. values; comms to p/h; basis changes impact to policy value:
Product design restrictions (5 year rule).
Access savings policy benefits twice a year; limit to Premiums + 5% compounded.
Main features of SCR standardised model (FPS-Dawg)
-Forward-looking risk based measure to assess insurers risks
-Measures risks by assessing stress scenarios on assets and liabilities of the insurer
-Is proportionate i.e. allow simplified methods
-Allows for risk reducing diversification benefits of risk i.e. mort vs morb
