Mnemonics v1 Flashcards
Reasons for calculating provisions:
BAD MEDICS
Benefit improvements for a benefit scheme
Accounts and reports / published and internal
Discontinuance/ surrender benefits
Mergers and acquisitions Excess of assets over liabilities and so whether discretionary benefits can be awarded Disclosure information for beneficiaries Investment strategy Contribution / premium setting Statutory solvency reports
Contract design factors:
AMPLE DIRECT FACTORS
Administration Marketability Profitability Level and form of benefits Early leaver benefits
Discretionary benefits Interests and needs of customers Risk appetite of the parties involved Expenses vs charges Competition Terms and conditions of contract
Financing (capital requirements) Accounting implications Consistency with other products Timing of contributions or premiums Options and guarantees Regulatory requirements Subsidies (cross)
Considerations when using past data to set future assumptions:
BEST ARCHER
Balance of homogeneous groups underlying the data may have changed
Economic situation may have changed
Social conditions may have changed
Trends over time, eg medical, demographic
Abnormal fluctuations
Random fluctuations
Changes in regulation
Heterogeneity within the group to which assumptions will apply
Errors in data
Recording differences (eg in categorisation of smoker)
Characteristics of a prime property:
CALL ST
Comparable properties for rent reviews and valuations
Age, condition and flexibility
Location
Lease structure
Size
Tenant quality
Practical problems with overseas investment:
MTV CATERPILLAR
Mismatching domestic liabilities
Taxation (may not be able to recover withholding taxes paid)
Volatility of currency
Custodian needed Additional admin required Time delays Expenses incurred / expertise needed Regulation poor Political instability Information harder to obtain (and less of it) Language difficulties Liquidity problems Accounting differences Restrictions on foreign ownership/ repatriation problems
Expenses incurred by a product provider:
COST RAID
Commission
Overheads
Sales / advertising
Terminal, eg paying benefits
Renewal administration, eg collection premiums / contributions
Asset management
Initial administration, eg setting up new client records
Design of the contract
External environment factors:
CREATE GREAT LISTS
Competition and the underwriting cycle Regulation and legislation Economic outlook Accounting standards Tax Environmental issues
Governance Risk management requirements Expertise from overseas Adequacy of capital Trends - demographics
Lifestyle considerations Institution structure Social trends Technology State benefits
Inappropriate advice:
CRIMES
Complicated products
Rubbish (ie incompetent) advisor
Integrity of advisor lacking, eg due to sales related payments
Model or Parameter errors
Errors in data relating to members
State-encouraged but inappropriate actions
Possible reasons for ART:
DESCARTES
Diversification Exploits risk as an opportunity Solvency improves/ source of capital Cheaper cover than reinsurance Available when reinsurance may not be Results smoothed Tax advantages Efficient risk management tool Security of payments improved
Benefit scheme info to disclose in accounts:
DIM CLAIMS
Directors’ benefit costs
Investment return over year
Membership movements
Change in surplus / deficit over year Liabilities accruing over year Assumptions Increase in past service liabilities Method Surplus / deficit
Reasons for analysing surplus:
DIVERGENCE
Divergence of actual vs expected (show financial effect / significance of)
Information to management and for accounts
Variance of whole is equal to the sum of variance from individual levers
Experience monitoring to feedback into ACC
Reconcile values for successive years
Group into one-off / recurring sources of surplus
Executive remuneration schemes (data for)
New business strain (show effects)
Check on valuation assumptions and calculations
Extra check on valuation data and process
Problems with industry data:
DR DONE Q
Detail insufficient
Risk factors coded in different way
Differences in target markets Out of date Not everyone contributes Errors Quality only as good as that of contributors
Consideration in assessing different models:
FENCED
Fit for purpose Expertise available in house Need for flexibility Cost of each option Expected number of times used Desired accuracy
Types of Actuarial advice:
FIR
Factual advice
Indicative advice
Recommendations
Importance of risk reporting:
FRAUD CRIME
Financing (appropriate price, reserves, capital requirements)
Rating agencies
Attractiveness to investors
Understand better (risks and their financial impact)
Determine appropriate control systems
Changes over time Regulator Interactions Monitor effectiveness of controls Emerging risk identification
Economic situations in which cash is attractive:
GRID
General economic uncertainty
Recession expected
Interest rates expected to rise
Depreciation of domestic currency expected
Aims of regulation:
GRIP
Give confidence in the system
Reduce financial crime
Inefficiencies in the market corrected (and efficient and orderly markets promoted)
Protect consumers
