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1
Q

What makes the ACC “actuarial”?

A

The ACC incorporates the following basic elements, which are common to all actuarial and risk management work:

  • The estimation of the financial impact of uncertain future events
  • a long-term rather than a short term time horizon, but decisions to be made in the short term in the light of likely future outcomes
  • consideration of stakeholders (requirements and risk appetite), legislation. regulation, tax and competition
  • The use of assumptions based on appropriate historical experience
  • Monitoring and periodically analysing the emerging experience in order to update models and strategies
  • The application of professional judgement
2
Q

What does the “specifying the problem” stage of the ACC involve?

A
  • Setting out clearly the problem from the viewpoint of each stakeholder
  • Assessing and analysing the risks for each stakeholder
  • Considering the strategic courses of action available to mitigate the particular risks in question
  • In particular, analysing the options for designing solutions to the problem to transfer risk from one set of stakeholders to another
3
Q

What does the “monitoring the experience” stage of the ACC involve?

A
  • Analysing periodically the actual experience against expected
  • Identifying causes of departure from expected experience and determining whether each source is one-off or likely to recur
  • Feeding back into the specifying the problem and developing the solution stages of the ACC
  • Making sure the model is ‘dynamic’ (i.e. assumptions are consistent) and reflects current experience

THE MONITORING OF NEW CONTRACTS OR NEW ELEMENTS OF CONTRACTS SHOULD OCCUR MORE FREQUENTLY.

4
Q

List 10 applications of the ACC in actuarial work

A
  • Asset-liability management (e.g. setting investment strategy)
  • Monitoring the effects of investment mismatching
  • Considering insurance and reinsurance options
  • Determining the profitability of the contract
  • Considering the need for and calculation of provisions
  • Determining the (current and future) solvency levels
  • Assessing capital requirements
  • Determining premiums / contributions
  • Assumption setting for contract / scheme design
5
Q

Outline why the ACC is suitable for use in risk management

A

Risk management also involves the following cyclical process:

  • analysing situations, products and projects to determine the risks to which they are exposed
  • quantifying the financial consequences of the risk events occurring
  • considering and quantifying appropriate methods for managing, mitigating and transferring the risks
  • monitoring the situation and the risk management procedures implemented as time develops
  • modifying or changing the risk management approaches adopted over time, in light of emerging experience
6
Q

Key Topics Under the General Commercial and Economic Environment

A

ESPERIA, a magical environment far away

  • External environment
  • Stakeholders
  • Providers of benefits
  • Economic Influences
  • Regulation
  • Insurance products
  • Asset Classes
7
Q

Key topics in developing the solution

A
  • Selecting Appropriate Actuarial Models
  • Selecting Appropriate Assumptions
  • Interpretation of results
  • Implications of results on Problem
  • Implications for all Stakeholders
  • Determine a Proposed Solution and Alternatives
  • Formalise a proposal
8
Q

Developing the solution

A

MODEL CONSTRUCTION
- An examination of the major actuarial models currently in use and how they may be adjusted for the
particular problem to be solved
- Selection of the most appropriate model to use for the problem, or construction of a new model
- Consideration and selection of the assumptions to be used in the model.

MODEL RESULTS
- Interpretation of the results of the modelling process
- Consideration of the implications of the model results
on the overall problem.
- Consideration of the implications of the results for all
stakeholders

SOLUTION

  • determining a proposed solution to the problem
  • consideration of alternative solutions and their effects on the problem
  • formalising a proposal
  • communicating the proposed solution and the alternatives
9
Q

Investment risk

A

The uncertainty associated with the outcome of making an investment

10
Q

Credit risk

A

The risk that a person or an organisation will fail to make a payment that they have promised

11
Q

Market risk

A

Risks related to changes in investment market values

12
Q

Inflation risk

A

Risk of real liabilities being larger than anticipated due to inflation.

13
Q

Underwriting risk

A

Risk of failures in underwriting leading the insurer to take on risks at an inadequate price.

14
Q

Insurance risk

A

Risk of more claims being made than expected

15
Q

Exposure risk

A

Risk of more claims arising from a particular event due to the insurer having greater exposure to a particular peril than had been appreciated.
Might be due to inadequate diversification within the portfolio of business written.

16
Q

Finance risk

A

Risk of not being able to obtain finance when required or not being able to obtain it at the anticipated cost.

17
Q

Possible solutions to mitigate risks

A
  • avoiding
  • accepting and minimising
  • sharing
  • transferring risk together with ongoing monitoring.