Part 1 Flashcards
1
Q
Jobs that actuaries do
A
- Risk
- Modelling
- Managing assets and liabilities
- Monitoring experience
2
Q
In order to assess, quantify, manage and monitor risks, actuaries need to be able to:
A
- Use economic analyses to form judgements about future inflation and interest rates
- Use data relating to future liabilities to estimate payments that need to be met
- Build, parameterise, test and implement models
- Handle assumptions in a critical manner
- Build appropriate margins into assumptions and appreciate the impact of such margins
- Project and discount future cashflows using assumptions
- Calculate the contributions required to build up a fund over time to meet future liabilities
- Monitor the progress of the accumulation of a fund
- Advise on reinsurance and other risk transfer mechanisms
- Analyse the variation between actual and expected experience
- Manage the variation in the progress of a fund to ensure that future liabilities are met
- Handle data in a critical manner
- Manage the build up of assets to meet future liabilities
- Contribute to decisions on investment policies aimed at meeting future liabilities
3
Q
Statutory roles:
A
- In his or her opinion proper records have been kept for the purpose of the valuation of the liabilities
- Proper provision for the liabilities has been made
- The liabilities have been valued in accordance with any legislative rules setting out the method and assumptions for their valuation
- The liabilities have been valued in the context of the assets, which in turn have been valued in accordance with the appropriate rules
- In his or her opinion the premiums/contributions for future years will be sufficient, on reasonable actuarial assumptions, and taking into account the free assets of the provider to enable it to meet its commitments in respect of the contracts written, or pensions promised
- A statement of the difference between the value of the provider’s assets and its liabilities
- He or she has complied with professional guidance notes
4
Q
Actuarial qualifications framework aims to promote actuarial quality through
A
- Methods
- Actuaries
- Communication
- Environment
5
Q
Being a Professional:
A
- Make decisions and take personal responsibility for them
- Act with integrity and detachment from his or her own personal circumstances
- Develop a direct, personal and trusting relationship with a client to advise on the most suitable solution for that particular client
- Recognise that the views of others may differ from his/her own and that the other views may be valid
- Achieve and maintain competence in skills
- Be reliable and timely
- Communicate clearly
- Recognise who the client is and what their needs are
- Recognise and seek to avoid conflicts of interest
6
Q
How to manage conflicts of interest
A
- Avoid conflicts of interest as far as possible
- Disclose the conflict of interest to both parties concerned
- Establish Chinese Walls to ring fence people and data
- Maintain detailed records of previous assignments
- Report to the regulator if the statutory actuary feels his client isn’t treating customers fairly
7
Q
Carrying out an actuarial task
A
- Ensure that you are familiar with the context in which you are operating and the implications of the results
- Consider resources and timescales
- Define the task with the client and consider any conflicts of interest
- Consider what are the questions that need answering
- Gather and assess the available information
- Set assumptions
- Decide on a method
- Arrive at a solution
- Check the solution and get someone else to check it
- Communicate the answer in a way that is understood to the client
- Consider the professional implications of the work being done
8
Q
To be fully briefed on a client consider
A
- Information available in the public domain
- Pre-project meeting
- Culture and risk appetite of the client
- Circumstances and objectives
- Conflicts of interest
9
Q
Types of advice
A
- Factual advice – based on research of facts
- Indicative advice – an opinion
- Recommendation – involving research, modelling and consideration of alternatives
10
Q
External environment
A
- Legislation and regulation
- State benefits
- Tax
- Accounting standards
- Capital adequacy and solvency
- Corporate governance
- Risk management requirements
- Corporate structure
- Commercial considerations
- Changing social trends
- Demographic changes
- Environmental issues
- Lifestyle changes
- International practices
- Technological changes
11
Q
Aims of Regulation:
A
- To correct perceived market inefficiencies and to promote efficient and orderly markets
- To protect consumers of financial products
- To maintain confidence in the financial system
- To help reduce financial crime
12
Q
Direct costs of Regulation:
A
- Administering the regulation
* Compliance for the regulated firms
13
Q
Indirect costs of Regulation:
A
- An alteration in the behaviour of consumers, who may be given a false sense of security and a reduced sense of responsibility for their own actions
- An undermining of the sense of professional responsibility amongst intermediaries and advisors
- A reduction in consumer protection mechanisms developed by the market itself
- Reduced product innovation
- Reduced competition
14
Q
Functions of a Regulator:
A
- Influencing and reviewing Government policy
- Vetting and registration of firms and individuals authorised to conduct certain types of business
- Supervising the prudential management of financial organisations and the way in which they conduct their business
- Enforcing regulations, investigating suspected breaches and imposing sanctions
- Providing information to consumers and the public
15
Q
Mitigation tools to deal with information asymmetry
A
- Disclosure required from financial firms
- Cooling off periods
- Chinese walls
- Consumer regulation on unfair contract terms and treating customers fairly
- Whistle blowing
