Practice Test Geeks(CIA) Certified Insurance Appraiser Practice Test
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Financial Modeling & Forecasting Flashcards

7 cards from real CIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Modeling & Forecasting flashcards as text

  1. A policyholder's business interruption claim model projects lost revenues of $2M over 6 months but saved variable expenses of $400,000. What is the net BI loss?

    Answer: $1,600,000

    BI loss equals lost revenue minus saved variable expenses: $2,000,000 − $400,000 = $1,600,000.

  2. In catastrophe modeling for flood risk, which data layer is MOST critical for estimating structure-level damage ratios?

    Answer: First-floor elevation relative to base flood elevation

    First-floor elevation relative to the base flood elevation (BFE) is the primary driver of flood damage ratios used in cat models.

  3. Which forecasting method is MOST appropriate when historical loss data is sparse but expert judgment about future conditions is available?

    Answer: Delphi method

    The Delphi method systematically collects and refines expert opinions, making it ideal when empirical data is limited.

  4. An appraiser calculates that a building's functional obsolescence reduces its value by $150,000 and external obsolescence reduces it by $80,000. If replacement cost new is $900,000 and physical depreciation is $120,000, what is the indicated depreciated value?

    Answer: $550,000

    $900,000 − $120,000 (physical) − $150,000 (functional) − $80,000 (external) = $550,000.

  5. A sensitivity analysis in a property insurance financial model tests how the net income changes when loss ratios shift from 60% to 70%. This analysis primarily helps management understand:

    Answer: The impact of a single variable on the overall result

    Sensitivity analysis isolates the effect of changing one variable (here, loss ratio) on a key output, revealing which assumptions most affect profitability.

  6. In a property replacement cost forecast, the Marshall & Swift cost index is used to:

    Answer: Adjust construction costs for location and time period

    The Marshall & Swift (now CoreLogic) index provides location- and time-period-specific multipliers to adjust base construction costs to current local conditions.

  7. In insurance financial modeling, 'redundant reserves' refer to which of the following situations?

    Answer: Reserves that exceed the ultimate loss amount actually paid

    Redundant (or redundant/favorable) reserves exist when initially set reserves exceed the actual amounts ultimately paid to settle all claims.