AIAF flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Statutory Accounting Principles
- SAP is the conservative accounting basis required by state regulators; it emphasizes policyholder protection, admitted assets, and immediate recognition of losses.
- Earned Premium
- The portion of written premium recognized as revenue because the policy coverage period has elapsed; calculated as written premium plus beginning unearned premium minus ending unearned premium.
- Unearned Premium Reserve
- A liability representing premium received but not yet earned; it is recognized over the policy term and reduced by ceded unearned premium for reinsurance.
- IBNR Reserve
- Incurred but not reported reserve estimates losses from claims that have occurred but have not yet been reported to the insurer as of the valuation date.
- Case Reserve
- A loss reserve established for a specific reported claim based on the adjuster's estimate of the ultimate cost, including defense and adjustment expenses.
- Acquisition Costs
- Expenses incurred to obtain new business, such as commissions and underwriting costs; under SAP they are expensed as incurred, while GAAP may defer them as DAC.
- Loss Ratio
- Incurred losses and loss adjustment expenses divided by earned premium; it measures the proportion of premium consumed by claims.
- Combined Ratio
- The sum of the loss ratio and expense ratio; a ratio below 100% indicates an underwriting profit and above 100% indicates an underwriting loss.
- Statutory Surplus
- The excess of admitted assets over liabilities on a statutory balance sheet; it serves as the financial cushion protecting policyholders and supports solvency.
- Admitted Assets
- Assets recognized on the statutory balance sheet because they are liquid or available to pay policyholder claims; non-admitted assets are excluded from surplus.
- Schedule P
- A statutory Annual Statement schedule showing loss reserve development by line of business over ten years, used to assess reserve adequacy.
- Schedule F
- A statutory schedule reporting reinsurance ceded and assumed; it identifies unauthorized reinsurers and required collateral for surplus credit.
- Risk-Based Capital Ratio
- Total adjusted capital divided by the authorized control level; it measures capital adequacy relative to the insurer's risk profile.
- IRIS Ratios
- Insurance Regulatory Information System ratios that flag financial trends such as premium growth, reserve adequacy, and surplus changes for regulatory review.
- Underwriting Income
- Earned premium minus incurred losses and underwriting expenses; it excludes investment income and taxes and measures core insurance profitability.
- Adverse Reserve Development
- An increase in estimated loss reserves for prior accident years; it raises incurred losses, reduces surplus, and signals possible reserve deficiency.
- Asset-Liability Management
- The practice of matching the duration and cash flows of invested assets to expected claim payments to manage interest-rate and liquidity risk.
- Duration
- A measure of a bond's price sensitivity to interest-rate changes; higher duration means greater price volatility for a given rate move.
- Ceded Reinsurance
- Insurance purchased by an insurer to transfer part of its risk to a reinsurer; it reduces net premium and losses and frees capital.
- Retention Level
- The amount of risk an insurer keeps before reinsurance applies; it balances the cost of reinsurance against the benefit of reduced volatility.
- Enterprise Risk Management
- A framework to identify, measure, monitor, and manage risks across underwriting, investments, and operations to protect capital and solvency.
- Surplus Notes
- Debt-like capital instruments that count as surplus; interest and principal payments require regulatory approval, so they preserve solvency during stress.
- Liquidity Risk
- The risk that an insurer cannot meet cash obligations, such as claims, without selling assets at a loss or incurring costly borrowing.
- Cost of Capital
- The return required by capital providers; it influences decisions on pricing, reinsurance retention, and investment allocation.
- NAIC
- The National Association of Insurance Commissioners develops model laws, the statutory Annual Statement blank, and coordinates state insurance regulation.
- Annual Statement
- The statutory financial report insurers file with state regulators; it includes the balance sheet, income statement, cash flow, and supporting schedules.
- Market Conduct Examination
- A regulatory review of an insurer's sales, underwriting, claims, and complaint practices to ensure compliance with consumer protection laws.
- IFRS 17
- An international accounting standard for insurance contracts; it measures liabilities using fulfillment cash flows, a risk adjustment, and a contractual service margin.
- Fiduciary Duty
- A legal obligation to act in the best interests of policyholders or beneficiaries, requiring loyalty, confidentiality, and avoidance of conflicts of interest.
- Conflict of Interest
- A situation where personal or financial interests could compromise professional judgment; it must be disclosed and managed under ethics policies.
- Insider Trading
- Trading securities while in possession of material nonpublic information; it is prohibited and can lead to civil and criminal penalties.
- Fraud Reporting
- Insurers must report suspected insurance fraud to state insurance departments and, where required, to law enforcement under applicable statutes.