TIA Section A - Odomirok 13

Question 1

Two reasons that insurers should not have large investments in mortgages

Answer 1

1. They are not part of the core business strategy

2. They are illiquid

Question 2

Schedule BA of A.S. describes

Answer 2

This gives information about other long term assets owned by the insurer

Question 3

Schedule D of A.S. describes

Answer 3

This provides details about stocks and bonds

Question 4

Schedule DA of A.S. describes

Answer 4

This provides detail about the short term investments

Question 5

Schedule DB of A.S. describes

Answer 5

This lists their derivatives owned by the insurer

Question 6

Schedule DL of A.S. describes

Answer 6

This provides detail about securities lending collateral assets. The purpose is to add transparency about these assets.

Question 7

Describe the securities lending process

Answer 7

Securities lending is when a company lends certain securities that it is not actively trading to another party for a fee. The borrower will usually short sell the asset, hoping to repurchase it later for a lower price, before returning it to the lender. This exposes the lender to credit risk, so the borrower needs to post collateral. The lender can invest this collateral, but needs to have it available to return to the borrower when they return securities.

Question 8

I’m securities lending, why should the collateral be invested in short term, low risk, and highly liquid markets?

Answer 8

• The arrangements between borrower and lender are usually short term
• The borrower can usually return the securities with short notice

Question 9

Schedule E of A.S. describes

Answer 9

This provides detail about cash and cash equivalents

Question 10

List some reasons that Schedule T is useful to actuaries

Answer 10

• They can see where the company writes business, so that they can research the relevant insurance laws of state
• By looking at historical schedules, they can see if the insurer has changed its geographic exposure
• When industry factors are used, this can help derive the weight to apply to the industry factors from each state

Question 11

Schedule Y of A.S. describes

Answer 11

This provides information about activities of insurer members of a holding company group