Chapter 32 Flashcards
(4 cards)
List the reasons for calculating provisions
BAD MEDICS
1. Benefit improvements for a benefit scheme
2. Accounts and reports (published and internal)
3. Discontinuance/surrender benefits
4. Merges and acquisitions
5. Excess of assets over liabilities and whether discretionary benefits can be awarded
6. Disclosure information for beneficiaries
7. Investment strategy
8. Contribution/ premium setting
9. Supervisory solvency reports
10. Provide for expected credit losses for a bank
State some global reserves that need to be held
- Credit risk reserve
- Pandemic reserve
- Catastrophe reserve
- Mismatch risk reserve
- Market risk reserve
What factors need to be considered when choosing the basis for assumptions and the method used for valuations?
- Client and need
- Risk appetite
- Nature of their assets
- Type of business
- Consistency
- Regulatory requirements
- Risk management process
- Size of the solvency capital
- Discontinuance or on going
Compare doing a valuation for provisions using actuarial judgement vs a prescribed method
Actuarial judgement
* Can exercise their professional judgement
* Can be specific to company
* Can be easily updated
* May incur costs to be checked by a regulator
Prescription
* Can be out dated
* Consistency between actuaries
* Aim to ensure appropriate assumptions are used
* Takes long to be updated
* Not company specific
