Chapter 39

Question 1

What components of uncertainty are monitored

Answer 1

Expenses
Investment performance
Risk experience (mortality, withdrawal, etc.)
Profile of the business/scheme (incl. persistency)
Environment (regulation, taxation, professionalism, etc.)

Question 2

Reasons for monitoring the experience

Answer 2

To check whether method, assumptions and models for financing benefits are appropriate
Update them so they better reflect expected future experience
Risk management
Monitor any trends, especially adverse experience and act on it Provide information to regulators and management

Question 3

How would you do an analysis

Answer 3

1. CREATE TWO CONSISTENT SETS OF DATA ON THE SAME BASIS, they must be of the same format, same source and reliable
2. Classify the risk pools into homogenous cells by risk factors
3. Compare the experience with past experience, with assumptions and industry experience and assumptions
4. Analyse economic, statistical and operational factors
5. Identify trends, cycles and anomalies and consider if the period under investigation is typical or adverse and if it is representative of future
6. Perform an analysis of surplus

Question 4

Outcomes of monitoring exercise

Answer 4

To check whether method, assumptions and models for financing benefits are appropriate
Update them so they better reflect expected future experience
Risk management
Monitor any trends, especially adverse experience and act on it Provide information to regulators and management

Question 5

Describe the monitoring process for investment performance

Answer 5

1. Consider the strategy and asset allocation
   * appropriateness to L
   * solvency and funding
   * expectations
   * regulation
2. Deviations from policy doc
3. Objectives, benchmark and peer performance