Actuary Certification ACTUARY Professional and Practical Applications 2

Question 1

An actuary is asked to certify a pension plan's actuarial valuation. Which professional standard most directly governs this certification?

Accepted Answer

ASOP No. 4 – Measuring Pension Obligations

Answer

ASOP No. 4 specifically governs the measurement of pension obligations and pension plan costs for actuarial certifications.

Question 2

Under the Code of Professional Conduct, an actuary who discovers a material error in prior work issued by another actuary should:

Accepted Answer

Inform the principal and encourage disclosure or correction

Answer

Precept 13 of the Code requires the actuary to advise the principal of the error and encourage appropriate disclosure or correction.

Question 3

A casualty actuary is reserving a long-tail liability line. Which method is most appropriate when the loss development pattern is still immature?

Accepted Answer

Bornhuetter-Ferguson method

Answer

The Bornhuetter-Ferguson method blends expected losses with emerged experience, making it more stable for immature long-tail lines.

Question 4

In life insurance, which reserve standard requires reserves to equal the present value of future benefits minus the present value of future net premiums?

Accepted Answer

Net Premium Reserve method

Answer

The Net Premium Reserve method defines reserves as PV(future benefits) – PV(future net premiums) using prescribed mortality and interest.

Question 5

An actuary working in enterprise risk management assigns a 99.5th percentile Value-at-Risk (VaR) to a risk. What does this measure represent?

Accepted Answer

The loss level exceeded only 0.5% of the time

Answer

VaR at the 99.5th percentile is the loss threshold exceeded with only 0.5% probability over the specified horizon.

Actuary Certification Practice Test

Actuary Certification Practice Test

Actuary Certification ACTUARY Professional and Practical Applications 2