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
A property insurer wants to reflect trend in its ratemaking. Which component of trend adjusts historical premium to current rate level?
Answer: On-level factor
The on-level factor adjusts historical premiums to reflect the current rate level, accounting for rate changes since the historical period.
Under Solvency II in the European framework, the Solvency Capital Requirement (SCR) is calibrated to:
Answer: 99.5% VaR over one year
Solvency II calibrates the SCR to the 99.5th percentile Value-at-Risk over a one-year horizon, ensuring survival in 199 out of 200 years.
When performing an asset adequacy analysis for a life insurer, the actuary tests whether assets are sufficient under various scenarios. This analysis is known as:
Answer: Cash flow testing
Cash flow testing projects asset and liability cash flows under multiple interest rate scenarios to assess asset adequacy.
An actuary uses the loss ratio method in workers' compensation ratemaking. The indicated rate change is -5%. The current combined ratio is 108%. Which statement is most consistent?
Answer: The insurer is unprofitable but the method still indicates a decrease
A combined ratio above 100% indicates underwriting losses, but the loss ratio method can still indicate a decrease if actual losses are below expected.
In a defined benefit pension plan, the Projected Unit Credit (PUC) method attributes benefit costs based on:
Answer: Each year of service earning one unit of projected benefit
Under PUC, each year of service credits one additional unit of the projected final benefit, so cost reflects the incremental unit earned each year.
An actuary produces a reserve estimate and is asked to provide a range of reasonable estimates. According to ASOP No. 36, this range should:
Answer: Reflect a reasonable range of possible outcomes, not a confidence interval
ASOP No. 36 defines a reasonable range as a range of estimates that could be produced by qualified actuaries, not necessarily a statistical confidence interval.
Which type of reinsurance agreement obligates the reinsurer to accept all risks ceded within a defined class, without individual risk selection?
Answer: Treaty reinsurance
Treaty reinsurance covers an entire class of business automatically, while facultative reinsurance requires case-by-case negotiation.