Section C

Question 1

Both SAP and GAAP do what for reinsurance recoveries on paid losses

Answer 1

record a recoverable asset to recognize anticipated reinsurance recoveries

Question 2

classification of invested assets for GAAP happens

Answer 2

at the time at which the instrument is acquired, but must reasses at each reporting date

Question 3

an insurer can engage in a structured settlement to

Answer 3

settle certain types of liability claims by purchasing an annuity from a life insurer

Question 4

typical tabular discount rate used

Answer 4

3.5%

Question 5

GAAP discount

Answer 5

allows SAP discount to be used, but also gives the insurers the option to use an alternative discount rate (as long as it is reasonable based on the conditions applicable at the time the claims are settled)

Question 6

statutory purchase

Answer 6

combinations that produce parent-subsidiary relationships

Question 7

statutory merger

Answer 7

combinations where equity of one entity is exchanged for equity of another

Question 8

under GAAP all combinations are accounted for with

Answer 8

purchase accounting

Question 9

10 K form: 4 parts

Answer 9

part 1: business description
part 2: financial statements
part 3: directors and officers
part 4: reports from any 8Ks filed

Question 10

risk adjustment in P-GAAP can be calculated with

Answer 10

cost of capital approach

Question 11

to get the risk adjustment for P-GAAP, ____ is applied to the required capital to provide the excess return

Answer 11

required return on capital in excess of the risk free rate & illiquidity premium

Question 12

risk margin in P-GAAP =

Answer 12

present value of the excess returns (discounted at the risk free rate plus illiquidity premium)

Question 13

In P-gaap accounting, there are no

Answer 13

deferred acquisition costs

Question 14

How to calculate the Value of the Business in Force (VBIF) for P-GAAP

Answer 14

determine the fair value of the liabilities expected to be incurred in connection with the unearned premium reserves and subtract this from the unearne premium

Question 15

extra steps to calculate fair value of liabilities under P-gAAP

Answer 15

unbiased loss ratio used to derive expected liabilities associated with the unearned premium

cash flows in the first year should include a load for policy maintenance costs

event risk needs to be considered by adopting a higher capital charge when determining the risk charge

Question 16

variable fee approach

Answer 16

based on General Model but has additional features to account for contracts that have direct participating features

Question 17

what is Solvency II

Answer 17

a principle based system of solvency regulation used in Europe

Question 18

For solvency II quantification, liabilities and surplus are divded into

Answer 18

Technical provisions (including reserves and risk margin)
minimal capital requirement (surplus)
solvency capital requirement (includes MCR)

Question 19

2 ways an actuary may become involved in the ORSA process

Answer 19

help the ERM team identify risks

models to assess risk are usually validated by a qualified actuary