Regulatory Framework and Compliance Flashcards
7 cards from real CAS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Framework and Compliance flashcards as text
Under the CAS Code of Professional Conduct, what must an actuary do when they discover that a previously issued actuarial communication contains a material error?
Answer: Take reasonable steps to correct or withdraw the communication
Precept 8 of the CAS Code of Professional Conduct requires actuaries to take reasonable steps to correct or withdraw a previously issued communication if they discover a material error.
Which regulatory concept requires that insurance rates must not be 'excessive, inadequate, or unfairly discriminatory'?
Answer: Tripartite rate regulatory standard
The tripartite rate regulatory standard—rates must be not excessive (protecting consumers), not inadequate (protecting solvency), and not unfairly discriminatory (protecting fairness)—is the foundation of US insurance rate regulation.
In a workers' compensation assigned risk plan (residual market), what is the primary regulatory purpose of these plans?
Answer: To ensure that employers who cannot obtain coverage in the voluntary market can still obtain mandatory coverage
Assigned risk plans fulfill the regulatory mandate that all employers have access to workers' compensation insurance, which is legally required in most states, even for high-risk employers rejected by the voluntary market.
What does the term 'guaranty fund assessment' refer to in the insurance regulatory context?
Answer: A mandatory contribution insurers pay to fund policyholder protection when another insurer becomes insolvent
Guaranty funds are state mechanisms funded by assessments on solvent insurers to pay covered claims of insolvent insurers, protecting policyholders from insurer insolvency.
Under Solvency II (European framework), which pillar addresses qualitative requirements including governance and risk management systems?
Answer: Pillar 2 — Supervisory Review Process
Pillar 2 of Solvency II covers governance, internal controls, risk management systems, and the supervisory review process that assesses qualitative aspects of insurer operations.
Which of the following best describes 'redlining' in the context of insurance regulation?
Answer: Refusing to write or charging higher rates in geographic areas based on race or national origin rather than actuarial factors
Redlining is an illegal practice of denying or restricting insurance in areas based on the demographic composition rather than legitimate actuarial loss data, violating fair lending and anti-discrimination laws.
Under the NAIC's Insurance Holding Company System Regulatory Act, what is the purpose of requiring prior approval for 'extraordinary dividends' from insurance subsidiaries?
Answer: To protect insurer solvency by preventing excessive capital extraction from regulated entities
Prior approval of extraordinary dividends prevents holding companies from draining capital from regulated insurance subsidiaries in ways that could impair their ability to pay claims.