Mnemonics v1 Flashcards

Question

Problems with industry data: | QUERIED

Answer 1

``` Quantity (credibility) Up-to-date? Errors Relevance (heterogeneity) Incomplete? Exceptionals (anomalies) Detail and format ```

Answer 2

Regulatory requirement to demonstrate solvency Expenses of launching a new product / starting a new operation Guarantees can be offered Cashflow timing management Unexpected events cushion, eg adverse experience Smooth profit Help demonstrate financial strength Investment freedom to mismatch in pursuit of higher returns Opportunities, eg mergers and acquisitions New business strain financing

Answer 3

Smooth results Avoid large losses Diversification Limit exposure to risk (single event, accumulations) Increase capacity to accept risk Financial assistance Expertise

Answer 4

Substandard risks - identify and offer special terms to substandard risks while aiming to accept as many lives as possible on standard premium rates Avoid anti-selection Financial underwriting against over-insurance Ensure that claims experience follows that expected in pricing basis Risk classification to ensure that all risks are treated fairly

Answer 5

``` Stability / quality of business improved Avoid surprises Management is capital improved Opportunities exploited for profit Synergies identified Arbitrage identified Stakeholders given confidence ```

Answer 6

``` Capable of refinement Length/expense of run not too long/ high Easy to understand Rigorous Independent verification of outputs Clear results Adequately documented Large range of implementation methods ``` ``` All significant features allowed for Developable Valid Inputs to parameter values appropriate Sensible joint behaviour of variables Output workings are communicable Reflects risk profile Simple whilst retaining key features ```

Answer 7

``` Strategy of investment Contribution obligations Risks involved Insolvency entitlement Benefit entitlements Expense charges ```

Answer 8

Setting sanctions Enforcing regulations Reviewing and influencing government policy Vetting and registering firms and individuals Investigating breaches Checking management and conduct of providers Educating consumers and public

Answer 9

Smoothed market value Historic book value Adjusted book value Market value Fair value Arbitrage value Discounted cashflow Stochastic modelling

Answer 10

Sponsor is aware of financial significance of benefits Informed decisions can be made Mis-selling is avoided Manages the expectations of members Encourages take up Regulatory requirement Security of scheme improved as sponsor / trustees are made more accountable

Answer 11

``` Size of the assets (absolute / relative) Objectives Uncertainty of the liabilities Nature of the liabilities Diversification Existing portfolio Return (expected long-term) ``` ``` Tax treatment of the assets / investor Restrictions / statutory / legal / voluntary Accrual of liabilities Currency of the existing liabilities Term of the existing liabilities Other funds’s strategies (competition) Risk appetite Solvency and accounting requirements ```

Answer 12

``` Spurious Time Adverse selection Temporary Initial Class ```

Answer 13

Security (default and other risks) Yield (real or nominal, running yield, expected return, compare with other assets) Spread (volatility of market values, diversification) Term Expenses or Exchange rate Marketability Tax

Answer 14

Types of assets that a provider can invest in Extent to which mismatching requirement is allowed Currency matching requirement Hold certain assets, eg government bonds Single counterparty maximum exposure Custodianship of assets Amount of any one asset used to demo solvency may be restricted Mismatch reserve

Answer 15

``` Tables eg actuarial mortality tables Reinsurers Abroad (data from overseas contracts) Industry data National statistics Experience investigations in the existing contract Regulatory reports and company accounts Similar contracts ```

Answer 16

``` Tax position Regulation on investor Assets already held Income / cashflow requirements Tastes (liabilities, education, fashion) Other assets and other investors Risk appetite ```

Answer 17

Happy with historic returns of passive fund Efficient market hypothesis holds Lack of time/ expertise for active management Investment management fees lower as no specialists needed Portfolio too small to justify active management Other similar institutions in passive funds Risks of active management considered too high Transaction costs lower as far less frequent

Answer 18

Character and ability of borrower Repayment ability of borrower Amount of the loan Purpose of the loan Security of the loan Risk vs reward

Answer 19

Capital efficiency as capital can be better targeted Diversification, including being able to identify in diversified areas of risk Pooling of risk Insight into risk in different parts of the business Economies of scale in terms of the risk management process

Answer 20

``` Accounts Investment monitoring Risk management Statutory returns Pricing Administration Marketing Management information Marketing Experience analysis and statistics Reserving / provisioning ```