Past material for final

Question 1

Risk

Answer 1

Uncertainty concerning the occurrence of a loss

Question 2

Chief Risk Officer (CRO)

Answer 2

Companies have this to oversee all aspects of ERM across the organization. The CRO overcomes the “silo” effect by having broad view

Question 3

Which risk owners do the CRO have to interview in the organization?

Answer 3

• Investment Managers: Own certain asset risk
• Actuaries: Own pricing/product management risk
• Facilities Manager: Own hazard risk

Question 4

Key aspects of the National Association of Insurance Commissioners (NAIC)

Answer 4

• Voluntary participation by state insurance departments
• Goal is to encourage greater uniformity, cooperation, coordination of laws and regulations
• Model laws & regulations
• No authority beyond what states give it

Question 5

When must insurable interest exist?

Answer 5

• Property Insurance: At the time of loss
• Life Insurance: Only at inception of policy

Question 6

Two basic types of plans

Answer 6

• Defined-benefit plans
• Defined-contribution plans

Question 7

Universal Life Insurance

Answer 7

A flexible premium policy that provides lifetime protection, similar to whole life

Question 8

Key aspects of Universal Life Insurance

Answer 8

• After the first premium, the policyholder decides the amount and frequency of payments, as compared to whole life where premiums are fixed (fixed in practice)
• Cash value does not follow a fixed schedule
• The policies have considerable flexibility but can lapse if premiums and interest insufficient to pay charges

Question 9

What aspects vary the cash value in Universal Life Insurance?

Answer 9

• Policyholder premium payments
• Insurer expense and cost of insurance (mortality) changes
• Rate insurer uses to credit interest to cash value. Often linked to short term interest rates, subject to a minimum