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Question 1 of 10
1. Question
In the investment model program, the number of future years ranges from 1 to 10, but the parameter can take the values of 0 or -1, what does 0and -1 mean if we are assuming no new business written?
Correct
When investment means there is a surplus of income over outgo, the number of future years is limited to the range of 1 to 10 but the parameter can take values of 0 or -1 meaning that it is being assumed no new business is written and it is either a run-off at 0 or a wind-up at -1.
Incorrect
When investment means there is a surplus of income over outgo, the number of future years is limited to the range of 1 to 10 but the parameter can take values of 0 or -1 meaning that it is being assumed no new business is written and it is either a run-off at 0 or a wind-up at -1.
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Question 2 of 10
2. Question
The program plan of the investment model uses the random number generator, which of the sentences about the number generation technique is true?
Correct
The random number generator generates random normal variants and stores them in an array for use by the later stages of the programs. The machine generates uniform random variates ranging from 0 to 2, after subtracting 1, they are used in a polar method to generate the corresponding random normal variates. The program stops when it has enough variates to fill the array.
Incorrect
The random number generator generates random normal variants and stores them in an array for use by the later stages of the programs. The machine generates uniform random variates ranging from 0 to 2, after subtracting 1, they are used in a polar method to generate the corresponding random normal variates. The program stops when it has enough variates to fill the array.
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Question 3 of 10
3. Question
The investment program plan can calculate the investment values for up to 26 future years involving the values of twelve different categories, one of which is cash yield. Why do you think there is a field different than gilts named cash yield?
Correct
The reason for the cash yield is that the assumed difference is 1% between cash and gilt yield, and when cash becomes negative, it is borrowed at a rate of 2% higher than the gilt rate. Also, gilts are assumed to relate to medium or long term, while the cash is either cash on deposit or very short term gilt.
Incorrect
The reason for the cash yield is that the assumed difference is 1% between cash and gilt yield, and when cash becomes negative, it is borrowed at a rate of 2% higher than the gilt rate. Also, gilts are assumed to relate to medium or long term, while the cash is either cash on deposit or very short term gilt.
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Question 4 of 10
4. Question
The equity price ratio is the square root of the ratio of the equity price at the end of the relative year to its value at the start of the year. What purpose does it serve according to you?
Correct
After the mid-year transactions, the remaining gilts and equities are updated in value by the year-end by multiplying the equity price ratio. It is to be noted that although interest is calculated at the start of the year, allowance is made for the loss of income on selling during the year duration by the multiplication of net outcome by a factor of one and half average of the yearly yield on the investments.
Incorrect
After the mid-year transactions, the remaining gilts and equities are updated in value by the year-end by multiplying the equity price ratio. It is to be noted that although interest is calculated at the start of the year, allowance is made for the loss of income on selling during the year duration by the multiplication of net outcome by a factor of one and half average of the yearly yield on the investments.
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Question 5 of 10
5. Question
How does a balance sheet show a misleading picture?
Correct
The balance sheet holds different values of assets and liabilities that have no single correct value. Each perspective holds a different value for them according to their share. A balance sheet that defines solvent position reflects that the assets will be adequate to meet the liabilities, without showing any probability whether the assets may prove to be inadequate to meet the liabilities.
Incorrect
The balance sheet holds different values of assets and liabilities that have no single correct value. Each perspective holds a different value for them according to their share. A balance sheet that defines solvent position reflects that the assets will be adequate to meet the liabilities, without showing any probability whether the assets may prove to be inadequate to meet the liabilities.
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Question 6 of 10
6. Question
In most countries, when does the supervisory authority allow a general insurance company to carry on writing business?
Correct
A general insurance company is allowed to carry on writing business by the supervisory authority only if it has some specified excess of the value over the liabilities. So, as a result, it provides an assurance that the assets will prove sufficient to meet the liabilities, but many solvency margin requirements do not inquire about the uncertainty inherent in different businesses and do not strategize for the risks of running off the claims payment and for the continuation of writing further business.
Incorrect
A general insurance company is allowed to carry on writing business by the supervisory authority only if it has some specified excess of the value over the liabilities. So, as a result, it provides an assurance that the assets will prove sufficient to meet the liabilities, but many solvency margin requirements do not inquire about the uncertainty inherent in different businesses and do not strategize for the risks of running off the claims payment and for the continuation of writing further business.
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Question 7 of 10
7. Question
Which one of the following problems arises in the reserving standards affecting solvency margin requirements and reduction of the standards for technical provision?
Correct
Reserving standards are ill-defined and non-existent that do not allow the requirement of the special provision to cover the changes in the value of assets on the adequacy to meet the liabilities. Out of the problems that can arise, some are as follows:
1- Adverse run-off of an existing business,
2- Poor underwriting experience,
3- Failure to recover from reinsurers,
4- Falls in asset values,
5- Excessive expenses, mismanagement, or fraud.Incorrect
Reserving standards are ill-defined and non-existent that do not allow the requirement of the special provision to cover the changes in the value of assets on the adequacy to meet the liabilities. Out of the problems that can arise, some are as follows:
1- Adverse run-off of an existing business,
2- Poor underwriting experience,
3- Failure to recover from reinsurers,
4- Falls in asset values,
5- Excessive expenses, mismanagement, or fraud. -
Question 8 of 10
8. Question
The object of a statutory solvency margin is two-fold, what in your view is the two-fold process in the statutory solvency margin?
Correct
The two-fold statutory solvency margin gives the reduction in the probability that the assets will prove inadequate to meet the liabilities and it provides a buffer for the company against the further deterioration in its financial position, which can occur before its authorization to write new business is withdrawn.
Incorrect
The two-fold statutory solvency margin gives the reduction in the probability that the assets will prove inadequate to meet the liabilities and it provides a buffer for the company against the further deterioration in its financial position, which can occur before its authorization to write new business is withdrawn.
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Question 9 of 10
9. Question
A solvency margin reflects the extent of the insured’s interest in the continued viability of the company, what happens when an insurer fails to meet the claim?
Correct
In most cases, when the insurer fails to meet claims, the insured can be exposed to quite serious liabilities. He is not able to limit his liability in the way he can with a trading company, that is why although solvency margin is not required of other trading companies, it reflects the nature of the business and the extent of the insured’s interest in the company.
Incorrect
In most cases, when the insurer fails to meet claims, the insured can be exposed to quite serious liabilities. He is not able to limit his liability in the way he can with a trading company, that is why although solvency margin is not required of other trading companies, it reflects the nature of the business and the extent of the insured’s interest in the company.
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Question 10 of 10
10. Question
What according to your understanding is meant by “de facto” solvent, when applied by the Supervisory authority on the insurance company?
Correct
The supervisory authority will stop the company from writing further business only when the position has reached that the company cannot meet its liabilities, in respect to the business in its books, otherwise the supervisory authority will be subject to criticism. As a resulting factor, the supervisory authority will seek to close a company to a new business when it can still be expected that the run-off of the existing liabilities will give a rise to the surplus of assets.
Incorrect
The supervisory authority will stop the company from writing further business only when the position has reached that the company cannot meet its liabilities, in respect to the business in its books, otherwise the supervisory authority will be subject to criticism. As a resulting factor, the supervisory authority will seek to close a company to a new business when it can still be expected that the run-off of the existing liabilities will give a rise to the surplus of assets.