CIA MfAD

Question 1

CIA MfAD - Definition of MfAD

Answer 1

the difference between the assumption for a calculation and the corresponding best estimate assumption

Question 2

CIA MfAD - Desirable risk margin characteristics

Answer 2

less known, higher margin; low freq high severity, high margin; long term high margin; wide distribution high margin; if emerging experience decreases uncertainty, decrease risk margin

Question 3

CIA MfAD - Claims development range

Answer 3

2.5-20%

Question 4

CIA MfAD - Recovery from reinsurance ceded range

Answer 4

0-15%

Question 5

CIA MfAD - investment return range

Answer 5

25-200 bp

Question 6

CIA MfAD - Reasons to select MfAD above range

Answer 6

unusually high uncertainty; MfAD expressed as a percentage unusually low

Question 7

CIA MfAD - Reason claims MfAD increased to 20%

Answer 7

20% is sometimes appropriate - ex: 2008

Question 8

CIA MfAD - Calculate investment return MfAD

Answer 8

asset/liability mismatch margin + timing risk margin + credit risk margin

Question 9

CIA MfAD - Calculate asset/liablity mismatch margin

Answer 9

coverage ratio * (asset - liability duration) / liablity duration * interest rate movement in runoff period

Question 10

CIA MfAD - Calculate timing risk margin

Answer 10

reduce duration by 10% and see what discount rate is needed at full duration

Question 11

CIA MfAD - Why mandating stochastic assumptions is wrong

Answer 11

time consuming testing; large number of assumptions; unique company circumstances; updating; undermine AA

Question 12

CIA MfAD - Where stochastic modelling benefits

Answer 12

skewness, high frequency and severity

Question 13

CIA MfAD - Types of quantile approaches

Answer 13

multiple of SD; VaR; TVaR