Risk Management and Insurance Flashcards
7 cards from real NAB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Management and Insurance flashcards as text
A risk heat map is primarily used to:
Answer: Visually prioritize risks by plotting them on a likelihood versus impact matrix
A risk heat map plots risks on a two-dimensional grid of likelihood and impact, helping management prioritize which risks require immediate attention.
What is 'reinsurance' in the insurance industry?
Answer: Insurance purchased by insurers to transfer portions of their risk to other companies
Reinsurance is insurance that an insurer purchases to transfer part of its risk exposure to another company, limiting potential losses on large claims.
Under AML (Anti-Money Laundering) risk frameworks at banks, which customer scenario typically represents the HIGHEST risk?
Answer: A politically exposed person (PEP) conducting large cross-border cash transactions
PEPs involved in large, irregular cross-border transactions represent high AML risk due to potential exposure to corruption, bribery, or illicit fund flows.
The principle of 'utmost good faith' (uberrimae fidei) in insurance law requires:
Answer: Both parties to disclose all material facts relevant to the insurance contract honestly
Utmost good faith obligates both the insurer and insured to fully and honestly disclose all material facts when entering into an insurance contract.
In enterprise risk management (ERM), the 'three lines of defense' model assigns risk ownership as follows:
Answer: Business units, risk/compliance functions, and internal audit
The three lines of defense are: (1) business units owning day-to-day risk, (2) risk/compliance functions providing oversight, and (3) internal audit providing independent assurance.
A bank's Net Interest Margin (NIM) is most directly exposed to which type of financial risk?
Answer: Interest rate risk
Interest rate risk directly affects NIM because changes in market rates impact the difference between interest income on assets and interest paid on liabilities.
Which document in an insurance contract specifies the risks NOT covered by the policy?
Answer: The exclusions clause
The exclusions clause lists specific risks, events, or circumstances for which the insurer will not provide coverage.