AFE Questions and Answers

The return on an instrument over a period of time is a combination of the cash flow it generates and the change in its value.

Inflation in Defense & Cost Containment (DCC) is evaluated separately and is estimated to occur at the same rate as the rate of inflation in the losses.

An estimate due to time lags in the receipt of reports from cendants is called reinsurance.

Uncollected premiums

The method which assumes that an entity’s experience in estimating case-basis reserves will be repeated in the future is called:

Which of the following is NOT included when initial acquisition of Subsidiary, Controlled and Affiliated Entities (SCA) is recorded as the sum of?

A company that has its loans serviced, for whatever reason, is usually charged a servicer’s fee. This fee is usually expressed:

Insurance entities usually write covered-call options because they consider the premium received for writing the options to be either:

Which risk assessment procedures are used to obtain an understanding of the entity and its environment, including its internal control?

Principal objectives of state statutes are: to investigate and settle some or all of the

When a retained asset account is established in the place of a cash settlement, an interest bearing account is created by the insurer for the beneficiary. The beneficiary receives a checkbook with which to draw upon funds in the new account. The account holder can make:

Financial Statements provide additional valuable information on the loans. Some of the more significant information provided includes EXCEPT:

In what, securities involve in repos are not delivered on the settlement date of the agreement and the contract may be extended upon mutual agreement of the buyer-lender and seller-borrower.

Special surplus funds are portions of surplus allocated or appropriated for a specific purpose. Special surplus funds usually are allocated voluntarily but also may be required by an insurance regulator. Which one the following is NOT an example of special funds:

The securities repurchased have the same stated interest rate as, and maturities similar to, the securities sold and are generally priced to result in substantially the same yield is known as:

To avoid double counting or omitting the effects of risks factors what should reflect assumptions that are consistent with those inherent in the cash flows?

In which account current, for individual policies, the agent collects the premiums directly from the insureds, subtracts his or her commissions and remits the net premiums due to entity?

Excess liability:

________ allow investments to be made, up to a certain percent of invested or total admitted assets, in assets that do not otherwise meet regulatory requirements. If their domiciliary jurisdiction regulations have a this, a life insurer with a business purpose for doing so can make a limited amount of mortgage loans that do not meet regulatory requirements without a reduction in surplus. However, some jurisdictions do exercise some extraterritorial jurisdiction related to it.

An instrument that grants the holder the right but not the obligation to buy the underlying asset at a specified strike price is known as:

Who is responsible for accounting for customer remittance advices and the agent’s current account?

Average severities projection method uses various claim count and average cost per claim date on either a paid or insured basis.

The subsequent measurement of the deposits is based upon whether the insurance and reinsurance contract:

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date is called:

What is the purpose of consolidated financial statements?

Which of the following is NOT of equity market sensitivities that are usually considered in dynamic hedging?

____________ is considered to be self-sustaining if it is financially and operationally independent of the reporting enterprise.

For purposes of establishing an appropriate financial statement reserve, the most important factors to consider are:

Which of the following is NOT the way to make changes in variables that can be considered in the loss reserving process?

Prepayment of a conventional mortgage loan, prior to its specified maturity, is discouraged through the general market acceptance of significant prepayment penalties. Often these penalties are calculated so that when prevailing market interest rates are:

The financial statements of which accounts maintained by insurance company that must be presented separately from the insurance company’s general account business?

It is defined as a debt restructuring whereby the insurer for economic or legal reasons related to borrower financial difficulties, grants a concession to the debtor that it would not otherwise grant.

What allows an entity to eliminate the reserve that was recorded for the claim, even if it exceeded the amount paid for the settlement?

There is pending litigation concerning the acquisition of a subsidiary and it is probable such litigation will result in its divestiture is an example of:

What confirms the hypothesized interest rate sensitivities and shows that the two lines of business are fairly complementary?

Permanent stockholders’ equity represents an outside claim (from the permanent stockholders’ perspective) on the net assets of a subsidiary.

The contracts that are not subject to unilateral changes in its provision and requires the performance of various functions and services for an extended period is called: