QA Bank Part 1 Flashcards
Outline areas of a life insurance company’s operations that an actuary may be required to certify.
The role of certification will relate primarily to the demonstration of solvency.
- proper records kept (liability valuation)
- proper provision for liabilities
- liabilities valued in accordance with legislation
- method & assumptions used for their valuation have been described.
- assets & liabilities valued consistently
- that assets were valued in accordance with legislation
- that in his or her opinion, the future premiums will be sufficient to meet its commitments.
Principle of proportionality
Work need only be performed that is proportionate:
- to the scope of the design
- or assignment to which it relates
- and the benefit that users would be expected to obtain from the work.
In other words, the principle of proportionality says that an action should be proportionate to the problem or task at hand and need not go beyond what is necessary to achieve its objective.
Principle of materiality
Matters are material if they could, individually or collectively, influence the decisions to be taken by users of the related actuarial information.
Assessing materiality is a matter of reasonable judgement which requires consideration of the users and the context in which the work is performed and reported.
This means that a principle in a TAS can be ignored if it is felt that its inclusion would not have a material effect.
You recently completed an actuarial task.
List the checks that you will carry out on your answers
Need to check that:
- the answers look reasonable
- the sensitivity testing carried out was appropriate
- the range of answers produced is consistent with the level of confidence associated with the assumptions made
- the results are reviewed by a peer.
10 Basic elements common to all actuarial work
MONITORING
- the ongoing monitoring through periodical analysis of the emerging experience
- modifying models / strategies in the light of this analysis of the emerging experience.
ASSUMPTIONS
- the use of assumptions based on appropriate historical experience, used to help understand the future
- the need to allow for the impact of legislation, regulation, taxation, competition
RISK
- recognition of stakeholders’ requirements and an understanding of their risk profiles.
INTERPRETATION
- the interpretation of the results of running a model to help develop practical strategies
ESTIMATION
- of the financial impact of uncertain future outcomes
- of the long-term rather than short-term position
- the making of decisions in the short term in the light of likely future outcomes
3 Types of advice that an actuary may provide
- Factual Advice
- Indicative Advice
- Recommendations
Factual advice
Giving an opinion based on research of the facts
Indicative advice
Giving an opinion without investigating the issues
Recommendations
Giving an opinion based on researched and modelled forecasts, with the alternative scenarios considered, and recommendations supplied based on the research of the facts.
List 10 stakeholders that an actuary may advise in relation to a life insurance company
- existing and prospective POLICYHOLDERS
D - board of DIRECTORS I - investment fund managers S - SHAREHOLDERS G - the GOVERNMENT R - REINSURERS A - AUDITORS C - CREDITORS E - EMPLOYEES R - REGULATORS
8 stakeholders of a final salary pension scheme
- sponsor, ie contributing employer
- members (actives, deferred and current pensioners)
- members’ dependents
- non-member employees
- the government
- regulators
- auditors
- tax authorities
- trustees
State the interests and financial needs of:
- the sponsor
- to provide benefits that meet the needs of the members and their dependents
- to manage the cost of providing the benefits
- to control the pace of funding of the scheme
- to meet legislative requirements
State the interests and financial needs of:
- members
- provision of benefits on events such as death, retirement, illness, withdrawal
- flexible / optional benefits
- flexible / optional contributions
- security of benefits
State the interests and financial needs of:
- members’ dependents
- protection in the event of death of the member
State the interests and financial needs of:
- non-member employees
- to have the option to join the scheme
- to not be unfairly disadvantaged relative to scheme members
State the interests and financial needs of:
- Government
- to set and monitor legislation impacting on private pension provision
- to fund and monitor State pension provision
State the interests and financial needs of:
- regulators
- to ensure that regulatory requirements are met