ACTUARY Professional and Practical Applications Flashcards
7 cards from real Actuary Certification practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 ACTUARY Professional and Practical Applications flashcards as text
An actuary is asked to certify a pension plan's actuarial valuation. Which professional standard most directly governs this certification?
Answer: ASOP No. 4 – Measuring Pension Obligations
ASOP No. 4 specifically governs the measurement of pension obligations and pension plan costs for actuarial certifications.
Under the Code of Professional Conduct, an actuary who discovers a material error in prior work issued by another actuary should:
Answer: Inform the principal and encourage disclosure or correction
Precept 13 of the Code requires the actuary to advise the principal of the error and encourage appropriate disclosure or correction.
A casualty actuary is reserving a long-tail liability line. Which method is most appropriate when the loss development pattern is still immature?
Answer: Bornhuetter-Ferguson method
The Bornhuetter-Ferguson method blends expected losses with emerged experience, making it more stable for immature long-tail lines.
In life insurance, which reserve standard requires reserves to equal the present value of future benefits minus the present value of future net premiums?
Answer: Net Premium Reserve method
The Net Premium Reserve method defines reserves as PV(future benefits) – PV(future net premiums) using prescribed mortality and interest.
An actuary working in enterprise risk management assigns a 99.5th percentile Value-at-Risk (VaR) to a risk. What does this measure represent?
Answer: The loss level exceeded only 0.5% of the time
VaR at the 99.5th percentile is the loss threshold exceeded with only 0.5% probability over the specified horizon.
Which credibility formula correctly expresses the full-credibility standard for claim counts when Z = 1 is desired?
Answer: n ≥ (z_α/2 / r)² × (1 + CV²)
Full credibility for claim counts requires n ≥ (z_{α/2}/r)² × (1 + CV² of severity) when claim sizes vary.
The Actuarial Standards Board (ASB) issues ASOPs. What is the primary purpose of an ASOP?
Answer: To identify appropriate actuarial practices and the documentation needed
ASOPs identify what the actuary should consider, document, and disclose — they are guidance standards, not laws.