Actuary Certification Regulation 3

Question 1

Under the Standard Valuation Law (SVL), what approach does the Principle-Based Reserving (PBR) framework use for life insurance reserves?

Accepted Answer

A blend of stochastic and deterministic modeling reflecting company-specific risks

Answer

PBR uses company-specific assumptions, stochastic modeling, and deterministic scenarios to determine reserves that better reflect the actual risks of the products being valued.

Question 2

An actuary who discovers a material error in a previously submitted actuarial opinion has an obligation under the Code of Professional Conduct to:

Accepted Answer

Take reasonable steps to correct or withdraw the erroneous opinion

Answer

Precept 8 of the Code of Professional Conduct requires actuaries to take reasonable steps to ensure that actuarial communications are not misrepresented or used inappropriately.

Question 3

Which of the following best describes the concept of 'regulatory surplus' in property-casualty insurance?

Accepted Answer

The amount by which admitted assets exceed total liabilities as measured under statutory accounting principles

Answer

Regulatory surplus under statutory accounting is the excess of admitted assets over total liabilities, representing the insurer's financial cushion under insurance regulatory standards.

Question 4

The McCarran-Ferguson Act of 1945 granted primary regulatory authority over insurance to:

Accepted Answer

State governments, exempting most insurance activities from federal antitrust laws

Answer

McCarran-Ferguson affirmed state regulation of insurance and provided a limited antitrust exemption for the business of insurance when regulated by state law.

Question 5

Under the Affordable Care Act (ACA), what is the medical loss ratio (MLR) requirement for large group health insurers?

Accepted Answer

At least 85% of premiums must be spent on medical claims and quality improvement

Answer

The ACA requires large group health insurers to spend at least 85% of premium revenue on medical claims and quality improvement activities, or rebate the difference.

Actuary Certification Practice Test

Actuary Certification Practice Test

Actuary Certification Regulation 3