Possible Questions

Question 1

ASOP 41:
Actuarial Communications

Answer 1

-The actuary responsible for The document
-The date & subject of the document
-The intended users of The report

Question 2

ASOP 41:
Property/Casualty Unpaid Claim Estimates

Answer 2

-The Intended purpose is to be used by management in year-end booking
-I was unable to provide an estimate for due to insufficient data
-I have relied upon The estimate from The (XYZ source)

Question 3

Insurance Contract Definition

IFRS 17 vs United States Defection

Answer 3

IFRS: “a contract under which one party (the insurer) accepts significant insurance risk from another party (the policy holder) by agreeing to COMPENSATE the policyholder if a specified uncertain future event (the insured event) adversely affects the policy holder”

US: “a contract under which one party (the insurer) accepts significant insurance risk from another party (the policy holder) by agreeing to INDEMNIFY the policyholder if a specified uncertain future event (the insured event) adversely affects the policy holder” (makes the policyholder hold)

in IFRS the policyholder may suffer a 1M loss, but the IC can reimburse only $1.00 disregarding the size of gross loss,
in the US, the IC will pay the policyholder subject to limits/attachments points etc.

Indemnifying vs Compensating
Indemnifying and compensating are terms often used interchangeably, but they have distinct meanings and applications. Indemnifying refers to the act of providing financial or non-financial benefits to someone as a form of reparation for a loss, injury, or damage they have suffered. It aims to restore the affected party to the position they were in before the incident occurred. On the other hand, compensating involves the payment or reward given to a person to offset their loss, injury, or suffering, often determined by legal precedents or statutory requirements. While indemnifying is often preventive, aiming to protect against future liabilities, compensating directly addresses losses that have already occurred. Understanding these distinctions is crucial for navigating legal, insurance, or financial contexts effectively.

Question 4

Solvency viewed from IFRS vs US

Answer 4

Solvency 2 designed to be a group wide solvency regime

US regime focuses on the regulation of INDIVIDUAL stat entities (U.S view is that each entity only has access to it own capital , “walled off”)

Question 5

Modern Solvency Monitoring Programs

Answer 5

SMI - As a result of 2008 financial crisis and the coordination between international insurance regulators has lead to NAIC’s Solvency Modernization Initiative (SMI)

gives a “Windows” and “Walls” approach
Gives “Windows” to state regulators to examine the group wide operations and the impact of these on the stat entity:
-enhanced communication between state regulators
-“supervisory colleges” of international regulators
-provides regulators access to and collection of info of affiliates, groups, etc
-enforcement measures to protect if violations occur (ability to intervene)
-group capital assessments which will result in a more effective overview (diversification)
-NAIC accreditation of state regulators that are involved in the group supervision

Maintains “walls” at the stat level
-regulators will be making sure each company has sufficient capital

Question 6

How Modern Solvency Monitoring Programs Changed

Answer 6

US used to have “walls” view (isolating each entity),

now “walls” have been supplemented with “windows” which allow regulators ability to look at group wide operations

Question 7

Solvency - ORSA

Answer 7

ORSA is designed to implement several of these “windows”

help regulators examine the insurance company and group.

NAIC Goals of ORSA:
1) provide effective ERM (enterprise risk management) at all insurers in which the insurer identifies/assesses / monitors/prioritizes /reports its material and relevant risks
2) provide a group level perspective on risk and capital to supplement the existing legal entity view

Focuses on the individual company as well as the group

An insurer that is a member of an insurance company holding system and meets certain Written premium benchmarks, it needs to do the following to meet the above goals:
-ORSA must be completed annually
-a ORSA Summary report must be created and provided to the lead state commissioner
-the document must be retained to support the effectiveness of its ORSA Process

Question 8

How do insurance companies act under Voluntary pools?

Answer 8

“servicing carriers”

or

any voluntary writer via a “take
all comers” provision

Both then then cede the
associated premium and loss to a centrally-maintained pool then assume a
portion of the aggregate financial results of the pool based on predetermined allocation
arrangements.

Question 9

It is possible for a pool member to be both a cedant to and reinsurer of the pool simultaneously

Answer 9

This occurs when the insurer is a servicing carrier for the residual market, or when the residual market is of the “take all comers” variety.

Under a “take all comers” market an insurer cannot refuse to insure a customer but can cede customers it does not choose to retain to the residual market pool.

Question 10

Explain fronting arrangements.

Answer 10

Fronting arrangements are used to issue policies on behalf of clients with no access to properly
licensed insurance companies.

I.E An insurer, that is an admitted carrier only in the United States, wants to insure a policyholder who owns commercial property both in the U.S. and Japan.

A fronting arrangement can facilitate this business objective
whereby a Japanese company issues the policy and cedes 100% to the U.S. company.