Mnemonics V2 Flashcards

Question

Reasons why disclosure is important

Answer 1

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

Answer 2

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

Answer 3

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

Answer 4

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

Answer 5

CLERICAL ADVISORS ``` Capable of refinements Length/ expense of run not too long or high Easy to understand Rigorous Independent verification of output Clear results Adequately documented Large range of implementation ``` ``` 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 6

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

Answer 7

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

Answer 8

SAD LIFE Smooth results Avoid large losses Diversification Limit exposure to single risk or accumulation of risks Increase capacity to accept risk (more business written or write large risk) Financial reinsurance Expertise

Answer 9

REG CUSHION Regulatory requirements 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 profits Help demonstrate financial strength Investment freedom to mismatch in pursuit of higher returns Opportunities (e.g. mergers and acquisitions) New business strain (financing of)

Answer 10

POURS ``` Protect monetary values Opportunities (to take advantage of) Uncertain liabilities Recently received cash Short-term liabilities ```

Answer 11

BCPPENF ``` Business risk Crime Political risk Project risks Economic risks Natural risks Financial risks ```

Answer 12

PIRATE ``` Partially transfer Ignore Reduce Accept (retain all) Transfer Evade (Avoid) ```

Answer 13

FIA MUDPIS Financial / quantifiable nature Interest in risk being insured Amount payable relates to the loss ``` Moral hazard eliminated as far as possible Ultimate limit on liability undertaken Data exists in which to price risk Pooling a large number of similar risk Independent risk events Small probability of occurrence ```

Answer 14

LUNCH ``` Legislation/ regulation Use of data Needs of client Consistency between assumptions How financially significant the assumption is/ are ```

Answer 15

LIME Liquidity preference Inflation risk premium Market segmentation Expectations

Answer 16

IS FIERCE Inflation Short term interest rate ``` Fiscal policy Imports/ exports Employment rate Returns on other investments Currency Economic growth ```

Answer 17

GRIP Give confidence in the system Reduce crime Inefficiencies in the market are corrected Protect consumers

Answer 18

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

Answer 19

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

Answer 20

SCARFACE MVR Spot checks Contributions and benefit payments consistent with accounts Asset income consistent with accounts Reconciliation of beneficial owner and custodian records where assets are held with a third party Full deed audit for certain assets (e.g. property) Average sum assured compared with previous investigation Consistency at start and end of period (shareholding’s) Equate member numbers/ Reconcile Movement data against records Validity of dates Reconciliation of benefits and premiums

Answer 21

CRISES Choice: Does the method give members choice? Risks: Who takes the risks of experience not being as expected? Investments: Do investments need to be realised, generating associated costs? Security: What security and/or guarantees does the method offer? Expenses: What expenses will be incurred? Surplus: Will any scheme or deficit be crystallised?

Answer 22

- Purpose of valuation - Regulation: - Going concern/ discontinuance - Client: - Understandable - Assumptions? - Realisable value? - Objective - Obtainable - Consistency - Type of assets being valued - Marketable? - Quoted prices - Volatility - sentiment / fundamentals - Information available - obtainable? - Time taken - Easy to: - Understand - Calculate - Explain - Difficulty in carrying out: - Actuarial judgement - Time consuming - Stability