Acronyms

Question 1

Contract design factors?

Answer 1

AMPLE DIRECT FACTORS:
Administration systems
Marketability
Profitability
Level and form of benefits
Early leaver benefits
Discretionary benefits
Interests and needs of customers
Risk appetites of the parties involved
Expenses vs. charges
Competition
Terms and conditions of contract
Financing (capital requirements)
Accounting implications
Consistency with other products
Timing of contributions or premiums
Options and guarantees
Regulatory requirements
Subsidies (cross-)

Question 2

External environment factors?

Answer 2

CREATE GRAND LISTS:
Corporate structure
Regulation and legislation
Environmental issues and climate change
Accounting standards
Tax
Economic outlook (interest, inflation, growth, exchange rate)
Governance
Risk management requirements
Adequacy of capital and solvency
New business environment
Demographic trends
Lifestyle considerations
International practice
State benefits
Technology
Social and cultural trends

Question 3

Investment and risk characteristics of assts?

Answer 3

SYSTEM T:
Security (default risk)
Yield (real or nominal, expected return)
Spread (volatility of market values)
Term
Expenses/exchange rate
Marketability
Tax

Question 4

Prime property characteristics?

Answer 4

CALL ST:
Comparable properties for rent reviews/valuation
Age, condition, flexibility of use
Location
Lease structure
Size
Tenant quality

Question 5

Factors affecting investment strategy?

Answer 5

A SAD CUTER INVESTOR:
Accounting regulations
Size of assets (absolute/relative)
Accrual of liabilities in future
Diversification
Currency of liabilities
Uncertainty of liabilities
Tax treatment of assets/investor
ESG issues
Risk appetite
Institution’s objectives
Nature of liabilities
Voluntary and legal restrictions
Existing portfolio
Solvency requirements
Term of the liabilities
Other funds’ strategies (competition)
Return (expected long-term)

Question 6

Reasons for analysing surplus?

Answer 6

DIVERGENCE:
Divergence of actual vs. expected (show financial effect/significance of)
Information to management and for accounts
Variance of whole is equal to the sum of variances from individual sources
Experience monitoring to feedback into ACC
Reconcile values for successive years
Group into one-off/recurring sources of surplus
Executive remuneration schemes (data for)
New business strain (show effects of)
Check on valuation assumptions and calculations
Extra check on valuation data and process

Question 7

Mortality/morbidity causal factors?

Answer 7

EGG NACHOS:
Education
Genetics
Gender
Nutrition
Age
Climate and geography
Housing
Occupation
Smoker status

Question 8

Difficulties of overseas investment?

Answer 8

MTV CATERPILLAR:
Mismatching domestic liabilities
Taxation (may not be able to recover withholding taxes paid)
Volatility of currency
Custodian needed
Additional admin required
Time delays
Expenses incurred/expertise needed
Regulation poor
Political instability
Information harder to obtain (and less of it)
Language difficulties
Liquidity problems
Accounting differences
Restrictions on foreign ownership / repatriation problems

Question 9

Risk categories?

Answer 9

COMBEL:
Credit
Operational
Market
Business
External
Liquidity

Question 10

Project risks?

Answer 10

PNEFCPB:
Political
Natural
Economic
Financial
Crime
Project
Business

Question 11

Expenses incurred by a product provider?

Answer 11

COST RAID:
Commission
Overheads
Sales / advertising
Terminal, e.g. paying benefits

Renewal administration, e.g. collecting premiums / contributions
Asset management
Initial administration, e.g. setting up new client records
Design of the contract

Question 12

Sources of data?

Answer 12

TRAINERS:
Tables, e.g. actuarial mortality tables
Reinsurers
Abroad (data from overseas contracts)
Industry data
National statistics
Experience investigations on existing contract
Regulatory reports and company accounts
Similar contracts

Question 13

Risk responses?

Answer 13

PIRATE:
Partially transfer
Ignore
Reduce
Accept (retain all)
Transfer
Evade (avoid)