Mnemonics V2 Flashcards
Reasons for calculating provisions
BAD MEDICS
Benefit improvements for 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
Possible reasons for ART
DESCARTES
Diversification Exploits risk as an opportunity Solvency improves / sources of capital Cheaper cover than reinsurance Available when reinsurance is not available Results smoothed Tax advantages Efficient risk management tool Security of payments improved
Inappropriate advise
CRIMES
Complicated products
Rubbish (I.e incompetence) advice
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
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 capacity Trends - demographics
Lifestyle considerations Institute structures Social trends Technology State benefits
Expenses incurred by a service provider
COST RAID
Commission
Overheads
Sales / advertising
Terminal expenses
Renewal administration (e.g. premium/ contribution collection)
Asset management
Initial administration, bringing in new policies into the books
Design of the contract
Practical problems with overseas involvement
MTV CATERPILLAR
Mismatch of domestic liabilities
Tax (may not be able to recover withholding taxes paid)
Volatile
Custodian needs Additional admin required Time delays Expenses incurred / expertise needed Regulation poor Political instability Information harder to obtain Liquidity problems Accounting differences Restrictions on foreign ownership / repatriation issues
Characteristics of prime property
CALL ST
Comparability
Age / condition and flexibility
Location
Lease structure
Size
Tenant quality
Consideration when using past data to set future assumptions
BEST ARCHER
Balance of homogeneous group underlying the data may have changed
Economic situation might have changed
Social conditions may have changed
Trends over time, eg medical, demographic
Abnormal fluctuations
Random fluctuations
Changes in regulation
Heterogeneity within the groups to which the assumptions will apply
Errors in data
Recording differences (eg in categorisation of smokers)
Contract design factors
AMPLE DIRECT FACTORS
Administration Marketability Profitability Level and form of benefit Early leaver benefits
Discretionary benefit Interest and needs of customers Risk appetite of parties involved Expenses vs charges Competition Terms and conditions
Financial (capital requirement) Accounting requirements Consistency with other products Timing of contributions or premium Options and guarantees Regulatory requirement Subsidies (cross)
Benefit scheme to disclose in accounts
DIM CLAIMS
Director’s benefit cost
Investment return over the year
Membership movements
Change in surplus / deficit over year Liabilities accruing over year Assumptions Increase in past service liabilities Method Surplus / deficit
Reasons for analysis of surplus
DIVERGENCE
Divergence of actual vs expected results
Information to management and accounts
Variance of whole equals to sum of variance of individual levers
Executive remuneration of executives
Reconciliation of results of successive years
Group into one- off or recurring sources of surplus or deficits
Experience monitoring to feed back into the ACC
New business strain (show effect of)
Check on valuation assumptions and calculation
Extra check on valuation process and data
Problems with industry data
DR DONE Q
Detail insufficient
Risk factors recorded differently
Differences in target market
Out-dated
Not everyone participate
Errors
Quality of data is as good as that of participants
Consideration in assessing different models
FENCED
Fit for purpose Expertise available in-house Need for flexibility Cost of all options Expected number of times to be used Desires accuracy
Types of actuarial advice
FIR
Factual advice
Indicative indicative advice
Recommendations
Importance of risk reporting
FRAUD CRIME
Financing (appropriate price, reserves and capital requirements)
Rating agencies
Attractiveness to investors
Understand risk better (risks and their financial impact)
Determine appropriate control systems
Changes over time Regulator Interaction Monitor effectiveness of risk controls Emerging risks identified
Economic situations which cash is attractive
GRID
General economic uncertainty
Recession expected
Interest rates expected to increase
Depreciation of domestic currency
Types of selection
STATIC
Spurious selection Time selection Adverse selection Initial Class
Cannons of lending
CRAP SR
Character and ability of borrower
Repayment ability of borrower
Amount borrowed
Purpose of loan
Security of loan
Risk vs reward
