Acronyms Flashcards
Contract Design Stakeholders
ALPACAS
Actuaries Lawyers Providers of benefits Accountants Customer Administrator Shareholders / Financial backers
Contract Design Factors
AMPLE DIRECT FACTORS
Administration systems Marketability Profitability Level and form of benefits Early leaver benefits
Discretionary benefits Interests and needs of customers Risk appetite of the parties involved Expenses vs charges Competition Terms and conditions of contract
Financing (capital requirements) Accounting implications Consistency with other products Timing of contributions or premiums Options and guarantees Regulatory requirements Subsidies (cross)
Reasons for calculating provisions
BAD MEDICS
Benefit improvements for a benefit scheme
Accounts and reports (published and internal)
Discontinuance / surrender benefits
Mergers and acquisitions Excess of assets over liabilities and so whether discretionary benefits can be awarded Disclosure information for beneficiaries Investment strategy Contribution / premium setting Supervisory solvency reports
Considerations when using past data to set future assumptions
BEST ARCHER
Balance of homogenous groups underlying the data may have changed
Economic situation may have changed
Social conditions may have changed
Trends over time, eg medical, demographic
Abnormal fluctuations
Random fluctuations
Changes in regulation
Heterogeneity within the group to which the assumptions will apply
Errors in data
Recording differences (e.g. in categorization of smoker)
Characteristics of a prime property
CALL ST
Comparable properties for rent review
Age, condition and flexibility of use
Location
Lease structure
Size
Tenant quality
Common aims of accounting standards (for benefit scheme disclosures)
CARD
Consistency in accounting treatment from year to year
Avoiding distortions resulting from contribution fluctuations
Recognising the realistic costs of accruing benefits
Disclosure of appropriate information
Practical problems with overseas investment
CATERPILLAR
Custodian needed Additional admin required Time delays Expenses incurred / expertise needed Regulation poor Political instability Information harder to obtain (and less of it) Language difficulties Liquidity problems Accounting differences Restrictions on foreign ownership / repatriation problems
Main difficulties of overseas investment
MTV
Mismatching domestic liabilities
Taxation (may not be able to recover withholding taxes paid)
Volatility of currency
Additional reports accompanying accounts
CIRCUS
Chairperson`s / CEO`s statements Investment report Remuneration report Corporate governance report Uncertainty (risk) report Strategic report
Expenses incurred by product provider
COST RAID
Commission
Overheads
Sales / advertising
Terminal, eg paying benefits
Renewal administration, eg collecting premiums / contributions
Asset management
Initial administration, eg setting up new client records
Design of the contract
External environment factors
CREATE GRAND LISTS
Corporate structure Regulation and legislation Environmental issues and climate change Accounting standards Tax Economic outlook (eg interest rates, inflation, growth)
Governance Risk management requirements Adequacy of capital and solvency New business environment Demographic trends
Lifestyle considerations International practice State benefits Technology Social and cultural trends
Inappropriate advice
CRIMES
Complicated products
Rubbish (ie incompetent) advisor
Integrity of advisor lacking, eg due to sales-related payments
Model or parameter errors
Errors in data relating to beneficiaries
State-encouraged but inappropriate actions
Benefit scheme info to disclose in accounts
DIM CLAIMS
Directors benefit costs
Investment return over year
Membership movements
Change in surplus / deficit over year Liabilities accruing over year Assumptions Increase in past service liabilities Method Surplus / deficit
Reasons for analyzing surplus
DIVERGENCE
Divergence of actual vs expected (show financial effect /significance of)
Information to management and for accounts
Variance of whole is equal to the sum of the variances from the individual sources
Experience monitoring to feedback into ACC
Reconcile values for successive years
Group into one-off / recurring sources of surplus
Executive remuneration schemes (data for)
New business strain (show effects of)
Check on valuation assumptions and calculations
Extra check on valuation data and progressiveness of actual vs expected (show financial effect / significance of)
Considerations in assessing different models
FENCED
Fit for purpose Expertise available in house Need flexibility Cost of each option Expected number of times used Desired accuracy
Types of actuarial advice
FIR
Factual
Indicative
Recommendation
Evaluation of risk mitigation options
FIRM
Feasibility and cost
Impact on frequency / severity / expected value
Resulting secondary risks
Mitigation required in response to secondary risks
Importance of risk reporting
FRAUD CRIME
Financing (appropriate price, reserves, capital requirements)
Rating agencies
Attractiveness to investors
Understand better (risks and their financial impact)
Determine appropriate control systems
Changes over time Regulator Interactions Monitor effectiveness of controls Emerging risk identification
Economic situations in which cash is attractive
GRID
General economic uncertainty
Recession expected
Interest rates expected to rise
Depreciation of domestic currency expected
Aims of a regulator
GRIP
Give confidence in the system
Reduce financial crime
Inefficiencies in the market corrected (and efficient and orderly markets promoted)
Protect consumers
Economic factors
IS FIERCE
Inflation
Short-term interest rates
Fiscal deficit Imports / exports Employment rate Returns on alternative investments Currency Economic growth
Factors to consider when setting assumptions
LUNCH
Legislation / regulation Use of the assumptions Needs of the client Consistency between assumptions How financially significant is/are the assumption(s)
Additional criteria for an insurable risk
MUD PIS
Moral hazard eliminated as far as possible
Ultimate limit on liability undertaken
Data exists with which to price risk
Pooling a large number of similar risks
Independent risk events
Small probability of occurrence
