CAS Risk Assessment and Management 2

Question 1

Which risk measure is defined as the expected loss given that the loss exceeds a specified threshold?

Accepted Answer

Tail Value at Risk (TVaR)

Answer

TVaR (also called CVaR or Expected Shortfall) is the expected loss conditional on the loss exceeding the VaR threshold.

Question 2

A risk with low frequency and high severity is best handled through which risk management technique?

Accepted Answer

Risk transfer via insurance

Answer

Low-frequency, high-severity risks are prime candidates for insurance transfer because catastrophic losses are rare but devastating when they occur.

Question 3

In enterprise risk management (ERM), 'risk appetite' refers to:

Accepted Answer

The amount of risk an organization is willing to accept in pursuit of its objectives

Answer

Risk appetite is the level of risk an organization's board and management are willing to accept while pursuing strategic goals.

Question 4

Which of the following best describes 'parameter risk' in actuarial modeling?

Accepted Answer

Uncertainty in the estimated values of model parameters

Answer

Parameter risk is the uncertainty that arises because model parameters must be estimated from finite data and may not equal their true population values.

Question 5

A reinsurance treaty that pays losses exceeding $500,000 per occurrence up to $2,000,000 is called:

Accepted Answer

Per-occurrence excess of loss

Answer

Per-occurrence excess of loss (XL) reinsurance attaches at a retention level and covers losses above it up to a limit on an event-by-event basis.

(CAS) Casualty Actuarial Society Practice Test

(CAS) Casualty Actuarial Society Practice Test

CAS Risk Assessment and Management 2