Actuary Certification Regulation 5

Question 1

Which provision in state insurance laws requires insurers to notify policyholders before cancelling or non-renewing a policy, giving policyholders time to obtain alternative coverage?

Accepted Answer

Advance notice of cancellation or non-renewal requirements

Answer

State laws require insurers to provide advance written notice (typically 30-60 days) before cancelling or non-renewing policies, protecting consumers from abrupt loss of coverage.

Question 2

Under the Employee Retirement Income Security Act (ERISA), what is the maximum period over which an employer may spread pension plan termination liability under PBGC insurance?

Accepted Answer

Liability is capped at 30% of the employer's net worth

Answer

ERISA limits an employer's liability to the PBGC upon plan termination to 30% of the employer's net worth, providing a cap on the financial exposure.

Question 3

When the NAIC adopts a model law, what is its legal effect in a given state?

Accepted Answer

It has no legal effect until each state legislature adopts it into state law

Answer

NAIC model laws are template legislation with no direct legal force; they only become law when individual state legislatures adopt them, and states may modify them in the process.

Question 4

An actuary performing a rate filing review for a homeowners insurer in a 'prior approval' state must understand that rates take effect:

Accepted Answer

Only after the state insurance department approves them

Answer

In prior approval states, insurers must receive explicit regulatory approval before implementing new rates, unlike file-and-use or use-and-file states.

Question 5

The concept of 'statutory accounting principles' (SAP) differs from GAAP primarily because SAP is designed to:

Accepted Answer

Emphasize solvency and a conservative balance sheet for policyholder protection

Answer

SAP is designed with a solvency focus, using conservative asset valuation and recognizing liabilities early to ensure insurers can pay claims even in stressed scenarios.

Actuary Certification Practice Test

Actuary Certification Practice Test

Actuary Certification Regulation 5