Acromyn

Question 1

Alteration principles (AB SAFE)

Answer 1

1. Affordability
   
   2. Boundary conditions
   3. Stable
   4. Avoid Lapse and re-entry
   5. Fair
   6. Easy to calculate

Question 2

Factors to consider for discontinuance (A POLICY CEASES)

Answer 2

1. Auction value
   1. Profit
   2. Lapse and re-entry
   3. Increase in benefit will require additional underwriting
   4. Consistency with out pay-outs, premiums paid and maturity value
      a. Early cannot be too low relative to the premiums paid
      b. Should not be too high later on.
   5. Competition
   6. Expectations
   7. Asset share
   8. Selection
   9. Equity
   10. Simplicity and stability

Question 3

Reasons for reinsurance (Fail Safe)

Answer 3

1. Financial assistance
   
   2. Avoid large single losses and accumulations of risk
   3. Increased capacity to write new business / larger risks
   4. Limit exposure to risk
   5. Smooth profit
   6. Arbitrage opportunities
   7. Favourable rates
   8. Expertise

Question 4

Product design factors (Forced Cramps)

Answer 4

1. Financing
   
   2. Onerousness of guarantees
   3. Regulation
   4. Consistency with other products
   5. Extent of cross subsidies
   6. Distribution channel
   7. Competitiveness
   8. Risk characteristics
   9. Admin systems (and other expertise)
   10. Marketability
   11. Profitability
   12. Sensitivity of profit

Question 5

Surrender value principles (PALACE DICE)

Answer 5

1. PRE
   
   2. Asset shares
   3. Later durations – maturity values
   4. Avoid discontinuities
   5. Continuing policyholders
   6. Early durations – premiums
   7. Document clearly
   8. Infrequent changes
   9. Competition
   10. Ease of calculation

Not in

1. Surrender values should treat both surrendering and continuing policyholders equitably.
2. The surrender values should produce a fair contribution to company profit.
3. Consistent with Auction values, which are often determined prospectively

Question 6

Pricing assumptions (RIM PINT CREW)

Answer 6

1. Reserving basis
   
   2. Investment
   3. Mortality
   4. Profit criterion
   5. Inflation
   6. New business
   7. Tax
   8. Commission
   9. Risk discount rate
   10. Expenses
   11. Withdrawals

Question 7

Risk Factors (RISK A LIFE DROWN CATS)

Answer 7

1. Reinsurance failure
   
   2. Investment
   3. Short-termism of senior management
   4. Kompetition
   5. Actions of distributors
   6. Legal and regulatory
   7. Inflation
   8. Fraud
   9. Expenses
   10. Data
   11. Rates of mortality
   12. Options and guarantees
   13. Withdrawals (persistency)
   14. New business
   15. Controls
   16. Aggregations
   17. Tax
   18. Selection

Question 8

Reasons for underwriting (SAFARI)

Answer 8

1. Suitable approach (eg increase premiums) and special terms
   
   2. Avoid anti-selection
   3. Financial underwriting against over-insurance
   4. Actual experience in line with expected
   5. Risk classification (risks rated fairly)
   6. Identify substandard health risks