CFE Statutory Accounting Principles & Insurance Financial Statements 2

Question 1

What is an 'unearned premium reserve' in insurance statutory accounting?

Accepted Answer

The portion of collected premiums applicable to the unexpired portion of a policy

Answer

A reserve for premiums that policyholders have failed to pay on time

Answer

Premiums held in escrow pending resolution of disputed claims

Answer

The reserve for expected future premium income not yet billed

Question 2

What does 'Schedule D' of the NAIC Annual Statement report?

Accepted Answer

Investment holdings including bonds and stocks

Answer

Direct premiums written by state and line of business

Answer

Reinsurance ceded and assumed transactions by counterparty

Answer

Claims experience by line of business and accident year

Question 3

What does the 'combined ratio' measure in property-casualty insurance?

Accepted Answer

The sum of the loss ratio and the expense ratio

Answer

The ratio of admitted assets to nonadmitted assets on the balance sheet

Answer

The ratio of policyholder surplus to total liabilities

Answer

The ratio of reinsurance ceded to direct premiums written

Question 4

What is 'loss development' in the context of insurance reserving?

Accepted Answer

The change in estimated ultimate claim costs as more information emerges over time

Answer

The process of marketing new insurance products to expand loss coverage

Answer

The increase in premium rates due to deteriorating loss experience

Answer

The development of new actuarial models for loss pricing

Question 5

What is 'reinsurance ceded' from the perspective of a primary insurer?

Accepted Answer

Risk transferred to a reinsurer in exchange for a reinsurance premium

Answer

Reinsurance coverage received from another company to protect the primary insurer

Answer

Insurance written directly to the policyholder without reinsurance support

Answer

The maximum loss the primary insurer retains on any single occurrence

Question 6

What are IRIS (Insurance Regulatory Information System) ratios?

Accepted Answer

A set of financial ratios used by regulators to identify insurers that may warrant further examination

Answer

Financial ratios used by insurance companies internally to price their products

Answer

Ratios that determine the maximum premiums an insurer can charge by line

Answer

Investment return ratios required to be disclosed to policyholders annually

Question 7

Under SAP, how is a 'surplus note' issued by an insurance company classified on the statutory balance sheet?

Accepted Answer

As equity (surplus) rather than debt, with regulatory approval

Answer

As long-term debt, identical to a bond issuance

Answer

As a contingent liability pending regulatory approval of repayment

Answer

Excluded from both assets and liabilities as an off-balance-sheet item