Idea generation

Question 1

The Applying the ACC to the specific scenario

Answer 1

The general economic and commercial environment
- External issues to be considered
- Competition
- State of the economy
- Rules and regulations

Specifying the problem
- set an objective/business plan
- identify the risks and potential mitigation options in the question
Losses in the early years of business
- consider all the potential stakeholders and the risks they face in the question

Developing the solution
- often involves using a model - suggest a type of model and how to acquire it (build/adjust/use as is)
- identify assumptions for the model - give specific examples
- suggest ways of dealing with any uncertainty in the assumptions
- talk about sensitivity testing - i.e. rerunning the model on different assumptions
- considering alternative solutions
- communicating the proposed solution and alternatives to stakeholders for decision-making

Monitoring the experience
- compare actual vs expected experience using dynamic model
- analyse the difference in actual versus expected and suggest on how you might deal with them
- discuss how frequently the monitoring should occur
- emphasize iterative nature of the ACC

Professionalism
- talk about the characteristics of the professional in the question
- mention Technical Actuarial Standards

Question 2

General business risks

Answer 2

market risk
credit risk
Business risk
operational risk
liquidity risk
underwriting risk

Question 3

3 main reasons for a risk to be insurable and the other ones

Answer 3

Insurable interest - individual should have fin interest in the insured event
Amount paid should bear a relationship with the fin loss that occured
Risk must be of quantifiable nature
Pooling of risks - individuals may be grouped together and their finances may be pooled
Pre-funding - money should have been put aside before risk occurs
Individual risks should be independent from each other
Prob of the risk event occuring should be small
There should be ultimate liability taken on the insurer
Avoid moral hazzard

Question 4

Ways to mitigate risk

Answer 4

Avoid
Accept and minimise
Sharing
Transferring