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LOMA 335 I*STAR > chapter 13 > Flashcards

chapter 13 Flashcards

1
Q

Regulators take two basic approaches, rules basis or principles basis, to stating their requirements. What are these?

A
  1. Rules: regulation of insuranceset explicit rules that each company must meet, regardless of company characteristics
  2. principles: insurance states accepted management principles that companies must adopt and requires companies to demonstrate that they participate in the principles.
    - there are no max and mini limits
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2
Q

True or false

principles-based regulatory requirements specifically or implicity require comapnies to undergo audits. Why?

A

true

to demonstrate that they are meeting the specified standards.

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3
Q

What are solvency regulations?

A

this addresses the need for insurance companies to be financially stable and capable of paying obligations and disbursing benefits when they are due.

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4
Q

What is the Market conduct regulation?

A

refers to the insurance regulation designed to ensure that insurance companies conduct business where policyholders and customers in a fair ethical manner.
- tends to be rules-based

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5
Q

MArket conduct laws and regulations in the US provide for Market conduct examinations, what are these?

A

regulatory audits of market conduct practice

- results in remediation projects for a company’s operating units.

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6
Q

What is a compliance remediation project.

A

a onetime undertaking to correct a failure in compliance and implement operation controls to ensure future compliance.

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7
Q

What is the international Association of Insurance Supervisors (IAIS)

A

an association comprised of the vast majority of insurance regulators and supervisors from around the word.
- objective is to improve supervision of the insurance industry; to maintain efficient, fair, safe, and stable insurance markets.

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8
Q

What is the Group of Twenty Finance ministers and Central bank governors? (AKA G20)

A

a forum for cooperation and consultation among representatives of key countries, and few non-governing institutions on matters pertianing ot the international financial system

  • no charter
  • privat discussions.
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9
Q

What is the European Union (EU)?

A
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10
Q

What do you call the insurance solvency legislation under the EU?

A

solvency II.
its designed to regulate insurance company solvency in the public interest and facilitate the development of a single market in insurance services among EU member nations.

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11
Q

Who is the International Accounting Standards Board (IASB)

A

private organization with the mission of developing and publishing a single set of global accounting standards. called IFRS which is indeed to apply without regard to national boundaries.

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12
Q

What is a self-regulatory organization? (SRO)

A

a governmental organization that exercises regulatory authority over an industry or profession.

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13
Q

What do you call the tax authority at the federal level in the US/

A

Internal Revenue Service (IRS)

they are responsible for collecting income taxes from individuals and businesss.

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14
Q

Who regulates the securities industry?

A

the federal Securities and Exchange Commision (SEC)
- primary mission is protecting the investing public by regulating all corporations who’s stocks or bonds are offered for sale to the public.

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15
Q

What does the Dodd-Frank Act do?

A

creates the Federal Insurance Office (FIO) whose first task si to recommend how to modernize and improve the regulation for insurance

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16
Q

Who investigates consumer complaints, including those from financial service customers?

A

State Consumer protection agencies.

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17
Q

Who is the overseer for insurance business in each individual state?

A

office of the insurance commissioner.

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18
Q

Who is the National Association of Insurance Commissioners (NAIC)

A

an association of state insurance commissioners formed to promote consistent insurance regulation
- their actions influence the individual state insurance commissioners, state legislatures and the insurance industry.

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19
Q

Define the term privacy:

A

refers to the protection of a customer’s nonpublic personal information from indiscriminate dissemination

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20
Q

What is nonpublic personal information?

A

information about a customer that a financial service company collects in connection with providing a financial product or service to the customer.

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21
Q

The EU 1998 Directive on Data protection, also known as Directive on Privacy is founded on what premise?

A

that a customer owns his own information, and must give unambiguous approval to process that information, much less share it.
- it also prohibits the exportation of data to countries outside the EU

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22
Q

What are the two landmark US federal laws that formed the major protections of customers’ privacy in the US?

A
  1. The Health insurance portability and accountability Act (HIPAA)
  2. Gramm-Leach-Bliley Act
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23
Q

What is the HIPAA?

A

federal legislation that sets the requirements that employer-sponsored group insurance plans, insurers and managed care organization must meet in providing individual and group health insurance.

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24
Q

What are the HIPAA provision design purposes?

A
  1. set security measures for protecting individuals privacy
  2. require healthcare providers to obtain writen consent to use health information for tx, payment, operations
  3. prohibit the sharing of information other that for tx, payment, or operations without the written consent of the pt
  4. allow individuals to access their medical records and request corrections
  5. Allow individuals to ask the restrictions to be placed on access to and use of their health information
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25
Q

The financial services modernization Act (GLB ACt) was designed to facilitate the operations of financial holding companies accross traditional boundaries. What does it require financial insitutions to do?

A
  1. disclose their policies for obtaining and sharing customers private personal information at the beginning of the relationship and annually after
  2. allow customers to opt out of the sharing of privat information
  3. maintain policies to protect the security and confidentiality of private information
  4. not share account numbers with nonaffiliated 3rd parties for marketing purposes.
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26
Q

True or False
the SEC role in the US regulation of public comapnies extends to setting standards for financial accounting, financial reporting and autfiting and control ssytems.

A

True

Most US insurance companies must met SEC-sponsored standards and additional state level STDs.

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27
Q

Who is FINRA?

A

the Financial industry regulatory authority (FINRA) a private, self-regulatory organization that helps carry out the SEC’s mission of protecting and educating investors in the United states.

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28
Q

What is an Audit

A

a control tool that consists of an undertaking to examine and evaluate company records and procedures to ensure that operational procedures and policies are effective, statements comply with standards, and preformance and quality is up to standards

29
Q

What is an auditor’s opinion?

A

a statement, prepared by a public accounting company, attesting that the information contained and insrer’s annual report offers a fair representation of the insrere’s financial position and operations adn that the report reflects applicable accounting standards.

30
Q

What is financial accounting?

A

the field of accounting that focuses primarily on reporting a company’s financial infomration to meet the needs of the companys external users. They are the end product of financial accounting.

31
Q

What is a financial audit?

A

an exercise for examining and evaluating company financial records and procedures to endsure 1) fianncial information/statements/souces of documentes compy with financial reporting standards and provide a fair and consistent depiction of the company;s financial condition and performance 2) the company’s quality standards are met
3) operational procedures and policies meet standards.

32
Q

What is a public company?

A

a company that has issued securities trough a public offering and those securities are traded on at least one stock exchange.

33
Q

What is the Institute of Chartered Fiancnial analysts?

A

a private, professional standard organization that maintains a professional code of conduct for chartered financial analysts and a widely adopted set of standards for measuring and reporting investment performances.

34
Q

What is a professional code of conduct?

A

is a listing of behavioural stnadards reuqired of memebers of a profession who agree to support hte standards as part of maintaining their professional stnading.

35
Q

the Institute of Chartered financial Analysts maintain the Global Investment Performance Standards (GIPS)

A

voluntary standards for measuring and reporting investment performance.
- they are widely adopted.

36
Q

The SEC requires US public comapnies to prepare financial reports using the accounting standards known as Generally Accepted Accounting Principles (US GAAP). What is this?

A

a set of financial accounting standard that all publicly traded comapnies in the US follow when preapring their financial statements.

37
Q

What is the primary role of the FASB?

Financial accounting stadnards board

A

to establish and support the use of US GAAP.

The publish the statements of Financial Accounting standards (SFAS)

38
Q

What is the role of SOX? (Sarbanes Oxley Act if 2002)

A

sets extensive requirements for internal controls and corporate governance.
under SOX companies and their officers must proactively demonstrate due diligence in financial reporting and disclosure and provide strong assurances.

39
Q

to implement some internal control provisions of SOX, the SEC designed the Public company auditing oversight board (PCAOB) to do what?

A

auditing standards for all public companies in the US.

- private sector, corporation establish to oversee the auditor of public compnies.

40
Q

what is a control framework?

A

a system standard for use in an internal control system

41
Q

What is an internal control system?

A

an organiztional function devoted to verigying that organizational standards, procedures, and other controls are applied as intended and are effective.

42
Q

What are the standards that are qualified for use as internal control framework under SOX?

A
  1. COSO framework
  2. The statement on auditing standards No. 70, Service ORganizations known as SAS 70.
  3. the Trumbull Report, published by the Financial reporting Council,
43
Q

What is the COSO?

A

the conference of sponsoring organizations of the treadway commission. It is a consotium of self-regulatory organizations that maintain financail standards.

44
Q

Who is inclkuded in the COSO members?

A
  1. AICPA - american institure of certified public accountants
  2. IIA- institute of Internal auditors
  3. The american acounting association
  4. the institute of management accountants and financial executives International.
45
Q

COSO maintains two frameworks for internal audits. NAme them

A
  1. 2002-framework for internal audits: COSO framework.

2. 2004- enterprise risk management -

46
Q

What is COSO’s 2002 framework define

A

internal control- designed to provide reasonable assurance regarding the acheivement of 3 control objectives

  1. effectiveness and efficiency of operations
  2. REliability of financial reporting
  3. compliance with applicable laws and regulations.
47
Q

What does the COSO 2004- enterprise risk management do?

A

its an integrated framework, known as COSO ERM framework which supports the 3 control objectives from the original COSO framework and adds a 4th objective: assurance of alignment between practices in teh audited areas of an organization with the organizations’ strategic and high-level goals.

48
Q

what is the SAS 70?

A

an auditing standard developed and maintained for service organizations by the american institute of certified public accountants (AICPA)

49
Q

What do you call the audit reports under SAS 70?

A

SAS 70 Service Auditor’s reports (SARs)

they evaluate the effectiveness of internal control over financial reporting as required under SOC.

50
Q

SAS 70 supports two types of service auditor’s reprots. What are they

A
  1. type 1 report- describes the service oganization’s control at a specific date
  2. type 2 report- includes all info in type 1 and adds reports on detailed testing of the service organization’s controls over a minimum period of 6 months.
51
Q

What are the Control standards for information and related technologies, known as CobIT

A

set of control standards designed and maintained for interpreting the PCAOB auditing and control objectives.

52
Q

What s a standard?

A

a statement that establishes uniform criteria, methods, processes, components, or practices.

53
Q

what is standardization in business/

A

feneral agreement as to measures, regulation, or standards and is desgined to support interoperability.

54
Q

What are the potential benefits when standardizing:

a) quality
b) safety
c) compatibility?

A

a) support consistent quality across many companies
b) safety standards can support safe worksite practices and product safety
c) compatibility standards can pave the way for the use of compatible, interchangeable and interoperable compoenents.

55
Q

What are the sources from which applicable standards derive?

A
  1. regulatory requirements
  2. formal stnadrds maintained by various stnadard-developing organizations.
  3. information consensus formed through practice or tradition
  4. support operations.
56
Q

Who is the preeminent global standards-setting organization?

A

ISO- International Organization for Standardization.

57
Q

ISO membership consist of one national standards body per ISO member Country. What is a national standard body (NSB)?

A

a country’s sole standardization orgnaization and the contry’s member of the ISO,

58
Q

What is the American National Standards Insitute? (ANSI)

A

a private association that supports the creation of voluntary standards for comapnies operating in the US.

  • they coordinate standards for the US with international standards and represent the US in the ISO.
  • they support the development of American National Stnadards (ANS)
59
Q

What does a standards-developing organization do?

A

they develop and publish industry-specific standards.

ie: ACORD - supports data and technology standards.

60
Q

What does the OASIS (organization for the advancement of structure information standards) support?

A

information stnadardization for all indsutried in areas such as security and internet services.

61
Q

What does ACORD do?

A

facilitates open concensus data standards and standard forms for the insurance industry by providing the industry with standarized forms library consistent terms, definitions, formats, protocols, and frameworks.

62
Q

In IT Jardon, what do you call the set of rules determining the format and transamission of electronic data?

A

protocol

63
Q

What is Extensible Mark-up language?

A

usually called XML, is a set of conventions developed by the WWW consortium.

  • no licensing fees,
  • its a text-encoding standard consisting of a set of symbols inserted in a text document to control its strucutre, formating, or relationship iamong its parts.
64
Q

XML is a metalanguage. What is that?

A

a language for describing other languages.

65
Q

XML allows developers to design their own customized markup languages for whatever document types they need. What else can XML do?

A
  1. facilitates cross-border, media-independents electronic publishing
  2. facilitates usuing inexpensive off-the-shelf data processing equipment.
  3. facilitates more extensive automation of data processing and eliminates some traning and development costs.
  4. permits users to display information in the desired formats
  5. facilitates long-term reuse of electronic data, because the language renders the data independent of particular tools, equipment, programming languages.
66
Q

ACORD has worked to standardize what?

A

the application of XML in the insurance industry in the form of two sets: life insurance and poperty/casualty insurance.

67
Q

what do you call the ACODS XML standards for life insurance, annuities, and nonmedical health insurance?

A

ACORD XML LAH

68
Q

What is an insurance rating agency?

A

an independent comapny that researches individual public companies and publishes information about the companies it rates.
- they publish the raitings.

LOMA 335 I*STAR (14 decks)

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