Odomirok 11 Flashcards

1
Q

Purpose of Common Interrogatories section

A

Give more details about the company’s

  • Operations
  • Business practices
  • Types of internal and external controls in place
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2
Q

Items discussed in General section of Common Interrogatories

A
  • Holding company relationships
  • Latest regulatory financial exams
  • Excessive sales commission levels
  • Merger activity
  • Suspension of licenses
  • Foreign control
  • Exemptions from required regulations
  • Whether senior management is subject to a code of ethics
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3
Q

List some examples of insight that users can get from the General Section of the Common Interrogatories

A
  • If it has suspended licenses or does not comply with regulations, perhaps it lacks internal discipline
  • If it has high commission levels, maybe it is sacrificing its commission in order to maintain or grow business
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4
Q

What details does the General Sections disclose about the latest financial exam

A
  • Date of the latest exam
  • Date through which the statements were evaluated
  • Release date for the examiner’s report
  • Name of the department performing the exam
  • Whether the insurer has complied with all adjustments & recommendations from the examination report
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5
Q

What questions do the interrogatories contain about the board of directors

A
  • Role of the board in approving the purchase/sale of investments
  • Does the company have a process in place to notify the board on conflicts of interest within senior management
  • Whether the permanent records of the board proceedings are retained
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6
Q

Purpose of financial interrogatories

A

Helps users understand:

  • If the insurer has financial obligations that were not reported in the Annual Statement
  • If the insurer has been providing significant financial support to its stakeholders/affiliates
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7
Q

What areas do the investment interrogatories question

A
  • Assets and investment decisions
  • Security lending programs & associated collateral
  • Hedging programs
  • Mandatory convertible stocks or bonds
  • Compliance with NAIC Purposes & Procedures manual
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8
Q

How do the interrogatories help identify if an insurer is using finite reinsurance

A

The insurer needs to answer an interrogatory that asks if it ceded reinsurance that:

  • Resulted in an underwriting gain/loss of more than 5% of the prior surplus; or ceded premiums/loss reserves of more than 5% surplus
  • Was accounted for as reinsurance (not deposit)
  • Had at least one of the following features: Duration of at least 2 years and non-cancelable/limited cancellation provision/aggregate stop loss coverage/either party has the right to commute for a reason other than the downgrade in the credit rating of the other party/ability to report or pay losses less frequently than quarterly/delayed reimbursements to the ceding company
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