CAA Fellow Actuary (China) flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Equivalence principle

The gross premium is set so that the expected present value of future premiums equals the expected present value of future benefits plus expenses, giving zero expected loss at issue.

Prospective reserve

The reserve at duration t equals the expected present value of future benefits and expenses minus future premiums, conditional on the policy being in force at that time.

Adjustment coefficient

In risk theory, the positive solution R of the Lundberg equation; it determines the exponential decay rate of the ruin probability in the Cramér–Lundberg approximation.

Panjer recursion

A recursive formula computing the aggregate claim distribution when claim counts follow the (a,b,0) class, using the count parameters and the severity distribution.

Zillmerised reserve

A modified net premium reserve that deducts a modified initial expense, producing lower early-duration reserves and allowing acquisition costs to be recovered gradually.

Contractual service margin

The unearned profit component of the insurance contract liability under IFRS 17, recognised in profit or loss as coverage is provided over the contract period.

Morbidity versus mortality

Morbidity measures the incidence or prevalence of illness or disability; mortality measures death rates. Health products use morbidity, life products use mortality.

Critical illness standard definitions

China's 2020 standard specifies 28 severe and 3 mild critical illness definitions that products must include, constraining pricing and incidence assumptions.

Chain-ladder method

A reserving technique that estimates ultimate claims by applying cumulative development factors derived from historical claim triangles to the latest diagonal of paid or incurred claims.

Bornhuetter–Ferguson method

A reserving method that blends an a priori expected ultimate loss with reported claims using the proportion of claims expected to be reported so far, stabilising immature accident years.

Premium deficiency reserve

A liability recognised when expected future claims and expenses exceed unearned premium, reflecting an onerous contract at the reporting date.

IBNER

Incurred but not enough reported: an estimate for deterioration of claims already reported, added to case reserves and IBNR to form the total claims reserve.

Projected unit credit

An actuarial cost method that attributes defined benefit entitlement to each year of service and discounts the accumulated benefit obligation to the valuation date.

Net defined benefit liability

The defined benefit obligation minus the fair value of plan assets, adjusted for the asset ceiling; remeasurements are recognised in other comprehensive income.

Funding ratio

Plan assets divided by the defined benefit obligation; a ratio below one indicates a deficit that must be addressed through contributions or benefit changes.

Dependency ratio

The number of pension beneficiaries divided by the number of contributing workers; a rising ratio increases the contribution rate needed in a pay-as-you-go system.

Modified duration

Macaulay duration divided by one plus the yield per period; it approximates the percentage price change for a small parallel shift in yields.

Convexity

The second-order sensitivity of bond price to yield changes; it explains why price rises more when yields fall than it falls when yields rise by the same amount.

Immunisation

Matching the duration and convexity of assets and liabilities so that the surplus is protected against small parallel shifts in interest rates.

Key rate duration

The sensitivity of a portfolio's value to a change in yield at one specific maturity point, capturing exposure to non-parallel shifts of the yield curve.

Fulfilment cash flows

Under IFRS 17, the expected present value of future cash flows plus a risk adjustment for non-financial risk, before adding the contractual service margin.

Variable fee approach

An IFRS 17 measurement model for direct participating contracts in which the entity's fee is a share of the underlying items, and financial assumption changes adjust the CSM.

Premium allocation approach

A simplified IFRS 17 measurement for short-duration contracts, recognising a liability for remaining coverage based on unearned premium plus an incurred claims liability.

Combined ratio

The sum of the loss ratio and expense ratio; a value above 100 percent indicates an underwriting loss that must be offset by investment income.

Insurable interest

A legally recognised financial interest in the subject matter of insurance, required at inception so the contract is not a wager.

Incontestability period

A statutory period, two years in China, after which the insurer generally cannot rescind a life policy for misrepresentation or non-disclosure.

Subrogation

The insurer's right, after paying a claim, to pursue third parties responsible for the loss, recovering no more than the amount paid.

Economic capital

The amount of capital needed to absorb unexpected losses at a chosen confidence level over a defined horizon, beyond the expected loss.

Risk aggregation correlation

Standalone capital requirements are combined using a correlation matrix; perfect correlation gives the sum, independence gives the square root of the sum of squares.

ORSA

Own Risk and Solvency Assessment: a forward-looking internal process linking an insurer's risk profile, capital needs, and business plan over a multi-year horizon.

Bühlmann credibility

A credibility factor equal to n divided by n plus k, where k is the ratio of expected process variance to variance of hypothetical means.

Model validation

An independent assessment of a model's conceptual soundness, data, assumptions, and outputs, using back-testing, sensitivity testing, and comparison with alternatives.