Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

exam 6 NEW > Schedule F > Flashcards

Schedule F Flashcards

1
Q

Provision for reinsurance

A

Liability - minimum reserve for uncollectible reinsurance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Why schedule F is important to actuary

A
  1. Look at assumed reinsurance to assess reasonableness of gross & net rsvs
  2. Analyze collectability risk (balance sheet only shows net rsvs)
  3. SAO requires comment & disclosure of net rsvs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Types of Collateral (4)

A
  1. Funds held by or deposited w/ reinsured company (primary)
  2. Letters of credit
  3. Ceded balances payable
  4. Other amt due to reinsurer
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Funds held by or deposited w/ reinsured company (type of collateral)

defined

asset or liability to primary?

asset or liability to reinsurer?

what is the advantage to primary?

A

portion of reinsurer premium withheld to pay claims

liability to primary

Asset to reinsurer

ADV to primary: Reduces primary’s credit risk b/c on hand to pay claims (no need to pay out of own pocket & get reimbursed)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Letter of credit (type of collateral)

defined

adv to primary

disadv to reinsurer (3)

A

defined: Bank issues credit to reinsurance company (to pay primary if can’t meet obligations)

Adv to primary: reduce credit risk b/c reinsurer doesn’t lose it in bankruptcy

  1. Disdv to reinsurer: Banks charge free
  2. Disdv to reinsurer: Reduces line of credit w/ bank
  3. Disdv to reinsurer: Reduces collateralization to meet obligations (reinsurer had to put up collateral w/ bank to get it)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Mapping assets & liab to balance sheet

A
  1. Asset = reinsurance recoverable on paid L&LAE
  2. Asset = net amt recoverable from reinsurers (balancing item)
  3. Liability = ceded reinsurance premium payable on paid L&LAE
  4. Liability = Provision for reinsurance
  5. Liability = Funds held by company under reinsurance treaties
  6. Liability = L&LAE
  7. Liability = UnearnedPremium
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Part 3 footnotes defined & importance (3)

A
  1. Disclose top 5 provisional commission rates (where ceded premium is >50k)
  2. Primary might be using high commission rates for surplus relief to keep IRIS 2 (NWP/PHS) below 300%
  3. High provision commission rates will lower IRIS 2 BUT IRIS 2 will pop if LR is bad
  4. Is primary misusing reinsurance to mask high operating leverage?
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Portfolio insurance

defined

reasons to use it

disadv

A

Primary gives PIF/liabilities to reinsurer + reinsurer gives primary discounted (less) premium

Reasons: a) exit LOB b) remove risk c) surplus relief

Disadv: costly – primary only receives a discounted premium b/c of uncertainty of risk being passed on

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Fronting carrier

defined

scenario

when acceptable?

A

Insurer that cedes >75% of its book

scenario: When A is not authorized to do business in MO then fronting carrier B will write the business in MO & cede it to A

Acceptable when companies are related (i.e. intercompany cessions w/ affiliates OR cessions to joint pool)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How schedule F monitors solvency (3)

A

Tracks reinsurance transactions

Calculate reinsurance provision

Shows effect on balance sheet of removing all reinsurance protection (part 8)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Adv of provision for reinsurance calculation in schedule F to monitor solvency

A

Reinsurance provision is formula →hard to manipulate→ easy to compare across companies.

Penalizes unauthorized and authorized slow paying reinsurers

(Part 8) Shows effect on balance sheet of removing all reinsurance protection

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Disadv of provision for reinsurance calculation in schedule F to monitor solvency (4)

A

Reinsurance provision is formula →no statistical basis for formula (20% cut off for slow pay)

Penalty for unauthorized and authorized slow paying reinsurers doesn’t account for financial strength rating

Doesn’t measure quality of reinsurer’s management

Doesn’t directly measure solvency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How can schedule F be improved to monitor solvency? (4)

A

Disclose details of reinsurance agreements

Include management input

Include reinsurer ratings

Replace 20% slow pay threshold w/ sliding scale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Certified reinsurer

defined

takes what into account (to addresses provison for reinsurance calculation disadvantage)?

provison for reinsurance 2 parts?

vs unauthorized reinsurer

A

Previously unauthorized but attained certification (legal authority) to do business in jurisdiction

Takes into account reinsurer financial strength (more strength→less provision for reinsurance)

2 parts = collateral deficiency + overdue reinsurance

vs unauthorized: lower reinsurance provison + can post less collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Considerations to certify reinsurer (5)

A
  1. Jurisdiction (location)
  2. Rating
  3. Regulatory history
  4. Fin pos – financial positon
  5. C&S Capital & Surplus
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

3 dates again of reinsurance recoverable begins (3)

A

Date recoverable is >50k AND entered into ledger as paid (used as default if no other date is specified)

Paid date

Reported date

17
Q

20% commission rate (commission payable)

A

Reinsurer owes primary 20% of ceded premium→PHS↑

18
Q

Q: calculate commission

GWP=100m

30% quote share

35% fixed ceding commission rate

A

primary pays reinsurer Ceded Prem = (100m*0.30) = 30M

Commision = 0.35P = 10.5M →reinsurer pays primary→PHS up

19
Q

Q: calculate commission

GWP=100m

30% quote share

35% provisional commission rate assuming 65%LR BUT LR turns out to be 80%

A

primary pays reinsurer Ceded Prem = (100m*0.30) = 30M

30M*0.35=10.5m→reinsurer pays primary→PHS up

30M*(0.80-0.65)=4.5m–>primary pays back reinsurer->PHS down

10.5M-4.5M = 6M

20
Q

Contingent commission

defined

included in commission payable?

A

Reinsurer pays primary commission depending on profit of reinsurance contract

Not included in ‘commission payable’ (to primary) bc depend on profit

21
Q
A
22
Q
A
23
Q
A
24
Q
A
25
Q
A
26
Q
A
27
Q
A
28
Q
A
29
Q
A
30
Q
A
31
Q
A
32
Q
A
33
Q
A

exam 6 NEW (32 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions