T_F102_General Business Environment and Risk 3

Question 1

Credit failure:

Answer 1

insurer is assessed by outside agencies, manage business to avoid a downgrade or to aim for a certain level (e.g. setting capital at a higher confidence level than required by regulator)

Question 2

Professional guidance:

Answer 2

ASSA APNs provided for practicing actuaries; ensures consistency, certain standard, offers level of protection for actuaries; should not be overly restrictive; may clarify interpretation of regulations; helps build confidence in industry.

Question 3

Risks - Macro

Answer 3

Policy and other data
Mortality
Claims experience for health & care products
Investment performance
Expenses
Withdrawals

Question 4

Generally 3 broad types of macro risks

Answer 4

model risk, parameter risk and random fluctuation risk.

Question 5

Policy and other data: risks

Answer 5

needed e.g. for valuations/internal investigations, actuary not in control. Also for assumption setting, risk inadequate.

Question 6

Mortality risks

Answer 6

parameter risk (new diseases/medical advances for annuities) and also random fluctuation risk.

Question 7

Claims experience for health & care products: risks

Answer 7

more complex as benefits can vary, model risk due to more complicated multi-state model requirements, CI risk of more than expected diagnoses of illnesses covered by the contract.

Question 8

Investment performance: risks

Answer 8

most investigations/tasks require a rate of return assumption on future returns- model/parameter risk arises.

Question 9

Expenses: risks

Answer 9

assumption needed for investigations, also need to allow for expenses inflation, range of ways to deduct expenses.