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exam 6c - fall 2023 > CIA.Subseq > Flashcards

CIA.Subseq Flashcards

1
Q

Define: calculation date

A

Effective date of calculation (Ex: for financial statements, the calculation date would normally be the balance sheet date)

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2
Q

Define: report date

A

Date on which the actuary completes the report on their work

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3
Q

Define: report

A

Actuary’s oral or written communication to users about their work

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4
Q

Define: subsequent event

A

An event of which an actuary first becomes aware after the calcuation date but before the corresponding report date

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5
Q

Define: adjusting event + provide an example

A
  • Event (after CalcDt) that provides evidence of conditions existing (at CalcDt): results in adjustment
  • Example: reinsurer insolvency after CalcDt that was due to gradual deterioration occuring before CalcDt
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6
Q

Define: non-adjusting event + provide an example

A
  • Event (after CalcDt) indicative of conditions arising (after CalcDt): NO adjustments
  • Example: reinsurer insolvency due to catastrophe
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7
Q

Describe the middle branch for the decision tree for reflecting/not reflecting subsequent events (this is essentially for subsequent events)

A

EWDP:

  • Error? (was there an error?), if yes: reflect, if no: next question
  • When? (when did the event occur?), if on or before CalcDt: reflect, if after CalcDt: next question
  • Different? (did event make entity different? if not, stop), if yes, on or before CalcDt: reflect, if yes after CalcDt: next question
  • Purpose? (what is the purpose of the work?), if report on entity as it will be: reflect, if report on entity as it was: inform only
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8
Q

(6.1 Catastrophic Event): FACTS: describe the timeline of events for 1998 ICE STORM

A

EVENT: Jan 5, 1998 ice storm in Eastern Canada

ACTUARY BECAME AWARE: Jan 5 1998 (same day as event)

SUBSEQUENT EVENT? Yes, actuary became aware after CalcDt (Yr End) & before report date (weeks after Jan 5 1998)

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9
Q

(6.1 Catastrophic Event): BRANCH: which branch of the subsequent decision tree should the ICE STORM example follow?

A

Middle

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10
Q

(6.1 Catastrophic Event): ACTION: according to the subsequent event tree, what action should the actuary take regarding the ICE STORM example

A

EWDP-inform:
- Error? No -> go to next question
- When? event occurred AFTER CalcDt -> go to next question
- Is Entity Different? Yes, AFTER CalcDt -> go to next question
- Purpose? Report on entity as it WAS

Final action: inform only

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11
Q

(6.1 Catastrophic Event): Relevant comments: provide any further relevant detail(s) related to the ICE STORM subsequent event example

A
  • The ice storm doesn’t make the entity different retroactively
  • The purpose of the actuary’s work was to report on the entity as it was
  • But note that premium liabilities would have been understated
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12
Q

What is the prime consideration when applying the subsequent event decision tree?

A

PRIME CONSIDERATION: is the event material?
- If not material then usually no action is required
- But sometimes it’s still beneficial to disclose the event

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13
Q

(6.2 Judicial Decision): FACTS: describe the timeline of events for the ALBERTA MINOR INJURY CAP?

A

EVENT: Feb 8, 2008 ($4000 Alberta Minor Injury cap struck down)

ACTUARY BECAME AWARE: Same day

SUBSEQUENT EVENT? Depend on each insurer’s report date

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14
Q

(6.2 Judicial Decision): BRANCH: which branch of the subsequent event decision tree should the ALBERTA MINOR INJURY CAP follow

A

BRANCH: middle (if insurer’s RptDt was AFTER Feb 8, so it WAS subsequent event)

BRANCH: right (if insurer’s RptDt was BEFORE Feb 8, so it WASN’T a subsequent event)

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15
Q

(6.2 Judicial Decision): ACTION: according to the subsequent event decision tree, what action should the actuary take regarding ALBERTA MINOR INJURY CAP

A

For insurers where it WAS a subsequent event (middle branch): EWD - reflect

For insurers where it WASN’T a subsequent event (right branch):
- If material, then reflect, so withdraw/amend report
- If not material, inform (“no action” may not be enough for industry-wide events)

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16
Q

(6.2 Judicial Decision): Relevant Comments: provide any further detail(s) related to the ALBERTA MINOR INJURY CAP

A

This example was complicated by the fact that some insurers would have completed their report by Feb 8, while other wouldn’t have

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17
Q

(6.3 Reinsurer Failure): FACTS: describe the timeline of events for the REINSURER FAILURE example

A

EVENT: Jan 15 (reinsurer failure)

ACTUARY BECAME AWARE: Jan 15 (same day)

SUBSEQUENT EVENT? Yes, actuary became aware after CalcDt (Yr End) & before report date (several weeks after Jan 15)

18
Q

(6.3 Reinsurer Failure): BRANCH: which branch of the subsequent event decision tree should the REINSURER FAILURE example follow

A

Middle

19
Q

(6.3 Reinsurer Failure): ACTION: according to the subsequent event decision tree, what action should the actuary take regarding the REINSURER FAILURE example?

A

EWD - reflect
- Error? No, go to next question
- When? Event occured after CalcDt, go to next question?
- Is Entity Different? Yes, BEFORE CalcDt (failure provided evidence of prior deteriorating conditions)

Final Action: reflect

20
Q

(6.3 Reinsurer Failure): Relevant Comments: provide any further relevant detail(s) related to the REINSURER FAILURE example

A

Action depends on cause of failure: here reinsurer failure had been building prior to CalcDt
- Failure AFTER CalcDt simply provided further evidence of conditions existing prior to CalcDt

If failure was due to catastrophe, path through decision tree would be: EWDP
- In other words, final action would be to inform only

21
Q

(6.4 Change in Markets): FACTS: describe the timeline of events for the STOCK MARKET DROP example

A

EVENT: 1st week of Jan (big drop in stock market)

ACTUARY BECAME AWARE: 1st week of Jan

SUBSEQUENT EVENT? yes, actuary became aware after CalcDt (Yr End) & before report date (several weeks after 1st week of Jan)

22
Q

(6.4 Change in Markets): BRANCH: which branch of the subsequent event decision tree should the STOCK MARKET DROP example follow

A

Middle

23
Q

(6.4 Change in Markets): ACTION: according to the subsequent event decision tree, what action should the actuary take regarding the STOCK MARKET DROP example?

A

EWDP - inform
- Error? No, go to next question
- When? event occurred AFTER CalcDt, go to next question
- Is Entity Different? Yes, AFTER CalcDt, go to next question
- Purpose of report? Report on entity as it WAS

Final action: inform only

24
Q

(6.4 Change in Markets): Relevant Comments: provide any further relevant detail(s) related to the STOCK MARKET DROP example

A
  • Main issue is whether the market drop provided evidence of conditions in existence PRIOR to CalcDt or not
  • It was decided that it did NOT (different from “reinsurer failure” example)
25
Q

(6.5 Missing Claims): FACTS: describe the timeline of events for the MISSING CLAIMS example

A

EVENT: before Jun 30 (claims database was missing claims)

ACTUARY BECAME AWARE: Aug 5

SUBSEQUENT EVENT? Yes, actuary became aware after CalcDt (Jun 30) & before RptDt (after Aug 5)

26
Q

(6.5 Missing Claims): BRANCH: which branch of the subsequent event decision tree should the MISSING CLAIMS example follow?

A

Middle

27
Q

(6.5 Missing Claims): ACTION: according to the subsequent event decision tree, what action should the actuary take regarding the MISSING CLAIMS example?

A

E-reflect
- Error? Yes

Final action: reflect (i.e. correct the error)

28
Q

(6.5 Missing Claims): Relevant comments: provide any further relevant detail(s) related to the MISSING CLAIMS example

A

If actuary had become aware AFTER the report date, this wouldn’t be a subsequent event. We would then be on the RIGHT BRANCH of the decision tree and ask these questions instead:
- Would the event be reflected IF it had been a subsequent event? Yes, go to next question
- Does the event invalidate the report? Yes

Final action: withdraw or amend report

29
Q

(6.6 Late Reported Claims): FACTS: describe the timeline of events for the LATE-REPORTED CLAIMS example

A

EVENT: Nov 20 (case reserve increase by ceding insurer)

ACTUARY BECAME AWARE: Jan 12

SUBSEQUENT EVENT? yes, actuary became aware after CalcDt (12/31) & before RptDt (several weeks after Jan 12, 1998)

30
Q

(6.6 Late Reported Claims): BRANCH: which branch of the subsequent event decision tree should the LATE-REPORTED CLAIMS example follow?

A

Middle

31
Q

(6.6 Late Reported Claims): ACTION: according to the subsequent event decision tree, what action should the actuary take regarding the LATE-REPORTED CLAIMS example

A

EW-reflect:
- Error? No, go to next question
- When? Event occured before CalcDt

Final action: reflect

32
Q

(6.6 Late Reported Claims): Relevant Comments: provide any further relevant detail(s) related to the LATE-REPORTED CLAIMS example

A
  • This situation often arises for reinsurers
  • It is NOT the same as a data error or missing claims
33
Q

(6.7 Change in Incurred Value of Large Loss): FACTS: describe the timeline of events for the LARGE LOSS example

A

EVENT: mid-Jan (change in incurred for large loss)

ACTUARY BECAME AWARE: Feb 5th

SUBSEQUENT EVENT? Yes, actuary became aware after CalcDt (Yr End) & before RptDt (after Feb 5th)

34
Q

(6.7 Change in Incurred Value of Large Loss): BRANCH: which branch of the subsequent event decision tree should the LARGE LOSS example follow?

A

Middle

35
Q

(6.7 Change in Incurred Value of Large Loss): ACTION: according to the subsequent event decision tree, what action should the actuary take regarding the LARGE LOSS example

A

EWDP - inform only
- Error? No, go to next question
- When? After the calculation date of Dec 31, go to next question
- Is the Entity Different? Entity is different after calculation date, go to next question
- Purpose of the report? Report on entity as it was

Final Decision: Inform only

36
Q

(6.7 Change in Incurred Value of Large Loss): Relevant Comments: provide any further relevant detail(s) related to the LARGE LOSS example

A

Same conclusion would apply whether the change in incurred value of a large loss has a positive or a negative impact on the contract liabilities

37
Q

(6.8 Change in Industry Benchmarks): FACTS: describe the timeline of events for the INDUSTRY BENCHMARKS example

A

EVENT: Jul 15 (new industry LDF benchmarks released)

ACTUARY BECAME AWARE: Jul 15

SUBSEQUENT EVENT? Yes, actuary became aware after quarterly CalcDt (6/30) & before report date (several weeks after Jul 15)

38
Q

(6.8 Change in Industry Benchmarks): BRANCH: which branch of the subsequent event decision tree should the INDUSTRY BENCHMARKS example follow?

A

Middle

39
Q

(6.8 Change in Industry Benchmarks): ACTION: according to the subsequent event decision tree, what action should the actuary take regarding the INDUSTRY BENCHMARKS example

A

EWD - stop
- Error? No, go to next question
- When? Event occurred after CalcDt, go to next question
- Is Entity Different? Event did NOT make entity different - LDFs don’t change much from qtr-to-qtr

Final action: nothing

40
Q

(6.8 Change in Industry Benchmarks): Relevant Comments: provide any further relevant detail(s) related to the INDUSTRY BENCHMARKS example

A

This situation could arise for a new company without its own credible data (must rely on industry benchmarks)

41
Q

Identify circumstances under which a subsequent event must be accounted for (4)

A
  • Event retroactively makes the entity different at calculation date
  • Event provides information related to the entity as it was at calculation date
  • Event happened before calculation date
  • Event makes entity different after calculation date and purpose of work is to report entity as it was after event
42
Q

Describe the right branch decision tree (this is for events known after calculation & report date)

A
  • Reflected? (would event be reflected if it were a subsequent event?), if no do nothing, if yes go to next question
  • Invalidates? (does the event invalidate the report?), if no consider informing users but don’t reflect event in work, if yes withdraw/amend report

exam 6c - fall 2023 (56 decks)

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