Odomirok Ch 13: Overview of Schedules and their Purpose

Question 1

Schedule A

Answer 1

This provides details about real estate directly owned by the insurer:

• Part 1 contains details about all of the real estate owned as of 12/31
• Part 2 provides a detailed listing of real estate purchased during the year
• Part 3 provides a detailed listing of real estate sold during the year

Question 2

Schedule B

Answer 2

This lists the mortgage loans (secured by real estate) owned by the insurer.

• Part 1 contains details about all of the mortgage loans owned as of 12/31.
• Part 2 provides a detailed listing of mortgage loans acquired during the year
• Part 3 provides a detailed listing of mortgage loans ended during the year
  (including repaid)

Question 3

2 reasons that insurers should not have large investments in mortgages:

Answer 3

1. They are not part of the core business strategy

2. They are illiquid

Question 4

Schedule BA of A.S. describes:

Answer 4

This gives information about other long term
assets owned by the insurer.
-Part 1: assets owned as of 12/31
-Part 2: assets purchased during the year
-Part 3: assets sold during the year

Question 5

Schedule D of A.S. describes:

Answer 5

This provides details about stocks and bonds.
-Part 1:bonds and certificates of deposits owned
by the insurer at 12/31
-Part 2: stocks owned as of 12/31

Question 6

Schedule DA of A.S. describes:

Answer 6

This provides detail about the short term
investments, including:
-Part 1: short term investments held as of 12/31.

Question 7

Schedule DB of A.S. describes:

Answer 7

This lists the derivatives owned by the insurer:
-Part A: positions in options, caps, floors,
collars, swaps & forwards
-Part B: positions in futures
-Part C: position in replication transactions
-Part D: counterparty exposure for the derivative
instruments open 12/31

Question 8

Schedule DL of A.S. describes:

Answer 8

This provides detail about securities lending collateral assets.
The purpose is to add transparency about these assets

-Part 1 lists the collateral assets that are not
included in other investment schedules.
-Part 2 lists those that are reported in other asset
schedules.

Question 9

Describe the securities lending process:

Answer 9

Securities lending is when a company lends certain securities that it is not actively trading to another party for a fee. The borrower will usually short sell the asset, hoping to repurchase it later for a lower price, before returning it to the lender. This exposes the lender to credit risk, so the borrower needs to post collateral. The lender can invest this collateral, but needs to have it available to return to the borrower when they return the securities.

Question 10

In securities lending, why should the collateral be invested in short term, low risk, highly liquid markets:

Answer 10

• the arrangements between borrower and lender are usually short term
• the borrower can usually return the securities with short notice

Question 11

Schedule E of A.S. describes:

Answer 11

This provides detail about cash and cash
equivalents.

-Part 1 provides: Detailed listing of the cash at
the bank, trust companies & savings and loan
associations; Totals of cash held at the
company’s offices; CDs maturing in a year or
less
-Part 2 lists the cash equivalents.
-Part 3 lists the special deposits

Question 12

Schedule T of A.S. describes:

Answer 12

-Part 1: Exhibits of Premiums Written (allocates
to states)
-Part 2: Interstate Compact – Exhibit of
Premiums Written

Question 13

List some reasons that Schedule T is useful to actuaries:

Answer 13

• They can see where the company writes business, so that they can research the relevant insurance laws of the state.
• By looking at historical schedules, they can see if the insurer has changed its geographic exposure
• When industry factors are used, this can help derive the weight to apply to the industry factors from each state

Question 14

Schedule Y of A.S. describes:

Answer 14

Provides information about activities of insurer
members of a holding company group.

-Part 1: Organizational chart: this indicates
where the company lies within the organization,
including its relationship to other members
-Part 1A (Detail of Insurance Holding Company
System) describes the relationship between each
entity, and the parent/ subsidiaries/ affiliates
-Part 2: Summary of the insurer’s transactions
with affiliates, including: shareholder dividends;
capital infusions; purchases/ sales of loans or real
estate; etc