Misc

Question 1

Define financial guaranty insurance

Answer 1

non-cancellable indemnity bond backed by an insurer to guarantee investors that principal and interest payments will be made

Question 2

Describe concept of materiality

Answer 2

an omission, understatement or overstatement in a work product is material if it is likely to affect either the intended principal user’s decision-making or the intended user’s reasonable expectations

Question 3

Considerations regarding disclosure of materiality in actuarial communications (SIC)

Answer 3

• Sophistication of user
• Important concept to the user
• Complexity of the concept

Question 4

Possible actions of report-writer based on materiality

Answer 4

Include item? - ask yourself should item be considered

Refine item? - ask yourself whether item is sufficiently accurate

Disclose item? - ask yourself whether item should be reported

Question 5

Identify characteristics of an insurance company that may affect materiality (F-STARS)

Answer 5

• Financial Strength
• Size
• Type of business
• Access to capital
• net Retention
• Stage of org’s life cycle

Question 6

Purpose of General Interrogatories (COB)

Answer 6

provide further info on:
- Controls
- Operations
- Business practices

Question 7

Items discussed in the Interrogatories (R-MESS)

Answer 7

• Regulatory Exams
• Merger activity
• Exemptions from regulation
• Sales commissions ( if they’re excessive just to acquire business)
• Suspension of licenses (if applicable)

Question 8

Info in Sch T of annual statement

Answer 8

premium writings by state

Question 9

Annual statement that shows cash and cash equiavalents

Answer 9

Sch E

Question 10

Annual statement that shows stocks and bonds

Answer 10

Sch D

Question 11

Annual statement that shows real estate

Answer 11

Sch A

Question 12

Describe Financial Sector Assessment Program

Answer 12

• periodic peer review of financial regulation for G20 countries
• benchmark against ICPs (Ins Core Principles) of IAIS
• US did well historically but may not going forward bc SAP doesn’t reflect TVM

Question 13

Describe Common Framework of IAIS

Answer 13

• a way to supervise international insurance groups
• needs a standard method for valuing assets and liabilities
• ComFrame proposes IFRS to meet this need but US method is different from IFRS

Question 14

Elements of an organizational exam for when insurers are applying for a license (4)

Answer 14

verification that:
- capital requirements are met
- mgmt team is in a good place
- records are in good order
- rates have been approved

Question 15

Items that are part of market conduct regulation for an insurer

Answer 15

• sales and advertising
• UW
• rates
• claims settlement

Question 16

What is a seasoned insurer

Answer 16

an insurer that already has experience doing business in another state

Question 17

Regulators prefer licensing applications from seasoned insurers, what are exceptions to this preference

Answer 17

• insurer has strong capitalization
• insurer is owned by a seasoned insurer