NB ACRONYMS

Question 1

Risk managment tools

MURDA

Answer 1

Management Control Systems

Underwriting (Initial and claims)

Reinsurance

Diversification

Alternative risk transfer ART

Question 2

The external environment considerations
CREATE GREAT LISTS

Answer 2

Competition/ underwriting cycle/ claims amounts and frequency
Regulation and legislation
Economic environment/ Claims expenses
Accounting standards
Tax differences
Environmental issues/ Exclusions

Governance/ compulsory benefits
Risks/ rating factors
Experience overseas
Adequacy of capital/ funding method
Trends: demographic, socio-economic

Lifestyle considerations
Institutional structures
Sales channels
Technology
State benefits

*Political situation

Question 3

Functions of the regulator
SERVICE

Answer 3

Setting sanctions
Enforcing regulation
Reviewing and influence legislation
Vetting and registering firms and individuals
Investigating breaches
Checks to capital adequacy and management
Educating consumers and public

Question 4

How regulation reduces information asymetries
SPIDER CC -TCF

Answer 4

Sales techniques restrict
Pricing controls imposed
Insider trading prevention
Disclosure of understandable info
Educate consumers
Restricted public info
Cooling off periods
Chinese walls established
TCF

Question 5

Different types of expenses
RAPID COST

Answer 5

Renewal admin (M)
Asset management (M)
Profit Loading (M,S,T)
Initial Admin (S)
Design costs (S)
Commission (S)
Overheads (M)
Sales and marketing (S)
Termination admin (T)

Question 6

Factors of contract design
AMPLE DIRECT FACTORS

Answer 6

Administration systems
Marketability/ marketing cost
Profitability- profit targets / Professional and ethical considerations/ Pricing and underwriting/
Level/form of benefits
Early Leaver benefits

Discretionary/discontinuance
Interest/ needs of customers
Risk apatite /risk charactarisics/reinsurance
Expenses vs Charges
Competition/ Commission-
Ts and Cs - no loop holes in contract/ Training of staff/ exclusions, waiting periods, excess payments

Financing
Accounting implications
Consistency with other products
Timing of premiums/contributions
Options and guarantees
Regulatory and statutory requirements
Subsidies / cross-subsidies

Additional factors:
- New business

-Conflicts between these factors

Question 7

Investment characteristics

SYSTEM T

Answer 7

Security (risk)
Yield (real or nominal, running yield, expected return, compare with other assets)
Spread (diversification, volatility)
Term
Expenses / exchange rate
Marketability

Tax

Question 8

Problems with overseas investment

Caterpillar

Answer 8

Custodian needed

Additional admin required

Time delays

Expertise needed

Regulation poor

Political instability

Information harder to obtain

Language barriers

Liquidity problems

Accounting differences

Restrictions on foreign ownership

Question 9

Main factors influencing institutional investment strategy

A SAD CUTER INVESTOR

Answer 9

• Accounting Regulations
• Size of assets(absolute/relative)
• Accrual of future liabilities(Writing more business)
• Diversification
• Currency of current liabilities
• Uncertainty of liabilities
• Tax and cashflow considerations
• Ease of valuation
• Environmental/social/governance issues
• Risk appetite
• Institution’s objectives
• Nature of liabilities
• Voluntary and legal restrictions
• Existing portfolio
• Solvency requirements
• Term of liabilities
• Competition strategies
• Return (Expected)

Question 10

Types of selection

STATIC

Answer 10

Spurious

Time

Adverse

Temporary initial

Class

Question 11

Why risk reporting is important

FRAUD CRIME

Answer 11

Financing(appropriate price,reserves,capital requirements)

Relating agencies

Attractiveness to investors

Understand risks better

Determine appropriate control systems

Changes over time

Regulator

Interactions of risks

Monitor effectiveness of controls

Emergin risk identification