Mnemonics Flashcards
dr scc : Factors to consider when setting assumptions
Demographic: Age, health, employment status
risk of anti-selection
state of the economy
customer
culture
dr scc : Factors to consider when setting assumptions
dr
Demographic: Age, health, employment status
risk of anti-selection
dr scc : Factors to consider when setting assumptions
scc
state of the economy
customer
culture
reg cushion : Why financial providers need capital
regulatory requirement to demonstrate solvency
expenses of launching a new product or starting a new operation
guarantees can be offered
cashflow timing management
unexpected events cushion, e.g. adverse experience, fines
smooth profit
help demonstrate financial strength/attract new business/ obtain good credit rating
investment freedom to mismatch
opportunities such as mergers and acquisitions
new business strain funding
reg cushion : Why financial providers need capital
reg
regulatory requirement to demonstrate solvency
expenses of launching a new product or starting a new operation
guarantees can be offered
reg cushion : Why financial providers need capital
cushion
cashflow timing management
unexpected events cushion, e.g. adverse experience, fines
smooth profit
help demonstrate financial strength/attract new business/ obtain good credit rating
investment freedom to mismatch
opportunities such as mergers and acquisitions
new business strain funding
system t : Features of assets in general
security risk yield real nominal, income yield spread term expenses marketability
tax
pours grid : Reasons for holding money market instruments
protect monetary values opportunities take advantage of opportunities uncertain liabilities recent inflow of cash short term liabilities
general economic uncertainty
recession
interest rates rising
depreciation of domestic currency
pours grid : Reasons for holding money market instruments
pours
protect monetary values opportunities take advantage of opportunities uncertain liabilities recent inflow of cash short term liabilities
pours grid : Reasons for holding money market instruments
grid
general economic uncertainty
recession
interest rates rising
depreciation of domestic currency
pnefcpb : Causes of risk
political e.g. political developments, opposition from third parties, disagreement among sponsors
natural e.g. storm, earthquake
economic e.g. interest rate or currency movements
financial e.g. incorrect cashflow estimates - costs and revenues, problems accessing finance
criminal e.g. fraud
project e.g. insufficiently defined objectives, poor design, over time or over budget
business e.g. competition, loss of key personnel, safety hazards, insolvency of a contractor
sham fads : Ways to value assets
smoothed market value
historic book value
adjusted book value
market value
fair value
arbitrage value
discounted cashflow
stochastic modelling
sham fads : Ways to value assets
sham
smoothed market value
historic book value
adjusted book value
market value
sham fads : Ways to value assets
fads
fair value
arbitrage value
discounted cashflow
stochastic modelling
price : When information from benefit scheme should be disclosed
payments when payments commence request on request intervals at certain interval - more regular than on request combination of all entry at entry into the scheme
simmers : Reasons why disclosure is important
sponsor the sponsor is made aware of the financial significance of the benefits
informed decisions can be made by members and trustees
misleading avoid misleading beneficiaries
manages managing member expectations
encourages take up of the product
regulatory requirement
security of scheme is improved as sponsors and trustees are made more accountable
divergence : Reasons for analysing surplus
divergence show the financial significance of AvE
information management information and for input to the accounts
variance the variance of the whole book must equal the sum of the variance of the individual parts
experience monitoring for feedback to the ACC
reconcile values for successive years
group the results into once off or recurring sources of surplus
executive data for executive remuneration schemes
new show the effects of new business strain
check on the valuation assumptions and calculations
extra check on the valuation data itself and the valuation process
traitor : Features of the investor
tax position regulation on investor assets currently held income requirements tastes other other competitors, assets and opportunities risk appetite
fenced : Considerations in assessing different models
fit for purpose expertise available in house need for flexibility cost of each option expected number of times to be used desired accuracy
call st : Prime property
comparables
age, condition, use or flexibility
location
lease or ownership type
size
quality of tenant
ample direct factors : Contract design factors
administration simple marketability profitability level and form of benefits early leaver benefits
discretionary benefits interests of customers risk appetite of the parties involved expenses vs charges competition terms and conditions
financing or capital requirements accounting consistency with other products timing of contributions or premiums onerousness of options and guarantees regulation subsidies cross subsidies
ample direct factors : Contract design factors
ample
administration simple marketability profitability level and form of benefits early leaver benefits
ample direct factors : Contract design factors
direct
discretionary benefits interests of customers risk appetite of the parties involved expenses vs charges competition terms and conditions
ample direct factors : Contract design factors
factors
financing or capital requirements accounting consistency with other products timing of contributions or premiums onerousness of options and guarantees regulation subsidies cross subsidies
fat sir : Risk mitigation techniques in project appraisal
further research
avoid
transfer
share
insure
reduce
fat sir : Risk mitigation techniques in project appraisal
fat
further research
avoid
transfer
fat sir : Risk mitigation techniques in project appraisal
sir
share
insure
reduce
sad life : Reasons for using reinsurance
smoothing of results
avoid large losses
diversification
limit exposure to risk, single events and/or accumulations
increase capacity to accept risk
financial assistance
expertise
sad life : Reasons for using reinsurance
sad
smoothing of results
avoid large losses
diversification
sad life : Reasons for using reinsurance
life
limit exposure to risk, single events and/or accumulations
increase capacity to accept risk
financial assistance
expertise
create great lists : External environment
competition and the underwriting cycle regulation and legislation environmental issues accounting standards tax economic outlook
governance risk management requirements experience from overseas adequacy of capital trends demographic trends
lifestyle considerations institutional structure social trends technology state benefits
create great lists : External environment
create
competition and the underwriting cycle regulation and legislation environmental issues accounting standards tax economic outlook
create great lists : External environment
great
governance risk management requirements experience from overseas adequacy of capital trends demographic trends
create great lists : External environment
lists
lifestyle considerations institutional structure social trends technology state benefits
rapid cost : types of expense loading
renewal administration asset management profits initial administration design of the contract
commission
overheads
sales and advertising
terminal claims expenses
rapid cost : types of expense loading
rapid
renewal administration asset management profits initial administration design of the contract
rapid cost : types of expense loading
cost
commission
overheads
sales and advertising
terminal claims expenses
grip : Aims of regulator
give confidence in the system
reduction in crime
inefficiencies in the market corrected, and promote efficient and orderly markets
protect consumers and the public
service : Functions of a regulator
setting sanctions
enforcing regulations
reviewing and influencing government policy
vetting and registering firms and individuals
investigating breaches
“checking funding levels, management and conduct of providers
“
educating consumers and the public
mudpis : Additional criteria for insurable risk
moral hazard eliminated as far as possible ultimate limit on liability undertaken data needed to price the risk exists pooling a large number of similar risks independent risk events small probability of occurrence
sounder tractors : Factors affecting investment strategy
size absolute or relative size of assets objectives uncertainty of the liabilities nature of the liabilities diversification existing portfolio return expected long term return
tax treatment of assets and investor, e.g. high income tax vs low CGT tax
restrictions statutory, legal or voluntary restrictions
accrual of future liabilities
currency of the existing liabilities
term of the existing liabilities
other strategies adopted by other funds or competitors
risk appetite
solvency requirements
tech scam : regulatory influences on assets held
types
extent
currency
hold
single
custodianship
amount
mismatching
dr doneq : Problems with industry data
details insufficient
risk risk factors are coded in different ways
differences difference in target market, administration systems, underwriting, geographical areas, distribution channels, data recording
outdated
not not everyone contributes
errors
quality the quality is only as good as the contributors
variable crisps card : Requirements of a good model
valid adequately rigorous inputs arbitrage behaviour length easy
communicable reflects independent sensible parameters simple
clear
a
refineable
developable
mtv caterpillar : Problems with overseas investments
mismatching domestic liabilities
tax
volatility of currency
custodian needed
accounting differences
time delays
expenses expenses incurred and expertise needed
regulation poor
political problems and instability
information asymmetries, information is scarce and harder to obtain
language difficulties
liquidity problems
administration additional administration required
repatriation repatriation problems and restrictions on asset ownership
mtv caterpillar : Problems with overseas investments
mtv
mismatching domestic liabilities
tax
volatility of currency
mtv caterpillar : Problems with overseas investments
caterpillar
custodian needed
accounting differences
time delays
expenses expenses incurred and expertise needed
regulation poor
political problems and instability
information asymmetries, information is scarce and harder to obtain
language difficulties
liquidity problems
administration additional administration required
repatriation repatriation problems and restrictions on asset ownership
dr doneq : Problems with industry data
dr
details insufficient
risk risk factors are coded in different ways
dr doneq : Problems with industry data
doneq
differences difference in target market, administration systems, underwriting, geographical areas, distribution channels, data recording
outdated
not not everyone contributes
errors
quality the quality is only as good as the contributors
sounder tractors : Factors affecting investment strategy
sounder
size absolute or relative size of assets objectives uncertainty of the liabilities nature of the liabilities diversification existing portfolio return expected long term return
CASPAR
Risk vs reward
- Is the loan an acceptable risk, given risk tolerance, other exposure etc?
- Are repayment terms (eg interest rate charged) acceptable?
CASPAR
Ability to repay
- Is the borrower able to service and repay the debt when due?
- How certain is the source of repayment?
- What margin of safety has been built into the projections and assumptions
CASPAR
Purpose
- To what use will the monies be put?
- Is the borrower in a sector where there are concerns, or where the total exposure is already sufficient?
- Is the project acceptable on ethical/moral grounds?
- Will the lending be subject to country, currency, environmental, resource, technological or other inherent risk?
- Are there controls to ensure that the monies are correctly applied?
CASPAR
Security
Is there any security in place should the borrower fail?
CASPAR
Amount
- Is the amount borrowed reasonable, taking into account the stated purpose?
- How much does the borrower contribute? Who stands to lose most if the project fails?
CASPAR
Character and ability
- Is the borrower (and/or its principals) known, competent and trustworthy?
- Do key personnel have the required depth and spread of skills and experience?
- If someone is found to have lied/intentionally mislead, do not lend
- Who introduced them? Can references be obtained?
offer : Factors to consider when analysing mitigation options in capital appraisal
overall impact on distribution f npvs
feasibility and cost
further mitigation to respond to secondary risks
effect on frequency, severity and correlation
resulting secondary risks
safer : Reasons for underwriting
substandard lives are identified and offered special terms
avoid anti-selection
financial underwriting is done to reduce the risk of over insurance on large policies
experience does not depart too much from that assumed in the pricing basis
risk classification ensures that all risks are treated fairly
murda : Risk management tools
management control systems underwriting and claims control systems reinsurance diversification ART
dipsis : ART products
discounted covers integrated risk covers post loss funding securitisation insurance derivatives swaps
crises : Options to consider when comparing discontinuance options
choice risk investments security expenses surplus
card : Common aims of accounting standards
consistency in the accounting treatment from year to year
avoid distortions resulting from the contribution fluctuations
realistic recognise the realistic costs of accruing benefits
disclosure of appropriate information
crimes : Inappropriate advice
complex or complicated products
rubbish incompetent advisor
integrity the advisor lacks integrity driven by sales related remuneration
model and parameter errors
errors data relating to memebers is incorrect
state state encouraged but inappropriate actions
cossacs : Benefits of good risk management
confidence given to stakeholders
opportunities identified and can be taken advantage of
stability and quality of business improved - we avoid bad risks and business is better for it
synergy opportunities
arbitrage opportunities
capital better allocated
surprises avoid surprises
trainers : Sources of data
tables e.g. actuarial mortality tables reinsurers abroad data from overseas contracts industry data national statistics experience experience investigations on the existing contract regulatory regulatory reports and company accounts similar contracts
