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IAI SA2 practice questions

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Question 1Life insurance products and their regulation

日本の生命保険業法において、保険業の免許を内閣総理大臣から受ける必要がある主体はどれか。

  1. 保険商品の計算を委託されたアクチュアリー個人
  2. 生命保険の募集を専業で行う代理店
  3. 生命保険会社を設立しようとする株式会社 Correct answer.
  4. 生命保険契約者保護機構

Explanation

保険業法上、保険業を営むには内閣総理大臣の免許が必要であり、免許の主体は保険会社そのものである。代理店や委託先の専門家、保護機構は免許を受けて保険業を営む主体ではない。

Question 2Life insurance products and their regulation

生命保険契約者保護機構の資金援助の対象となる「破綻保険会社」の説明として最も適切なものはどれか。

  1. 保険業を廃止した保険会社
  2. 外国の保険会社の日本支店
  3. 支払不能に陥るおそれがあると認められた保険会社 Correct answer.
  4. 保険業の免許を取り消された保険会社

Explanation

契約者保護機構の制度は、保険会社が支払不能に陥るおそれがあると認められた場合等に、契約者保護のための資金援助を行う枠組みである。免許取消しや事業廃止は直ちに支払不能を意味するものではない。

Question 3Life insurance products and their regulation

生命保険商品の設計において、予定死亡率を実際の死亡率より低く設定した場合に生じる一般的な影響はどれか。

  1. 利差損が必ず発生する
  2. 死亡保険金の支払原資が減少し保険料が高くなる
  3. 解約返戻金が常にゼロになる
  4. 死差益が発生しやすくなり保険料は相対的に低くなる Correct answer.

Explanation

予定死亡率を実際より低く見積もると、死亡保険金の支払が想定より少なくなり死差益が発生しやすくなる。その結果、保険料は相対的に低く設定できる。利差や解約返戻金の有無は死亡率の設定だけでは決まらない。

Question 4Life insurance products and their regulation

変額保険（終身型）の一般的な特徴として最も適切なものはどれか。

  1. 元本割れが生じることはない
  2. 特別勘定の運用実績により保険金や解約返戻金が変動する Correct answer.
  3. 運用実績にかかわらず保険金が一定である
  4. 契約者は運用指図を行わない

Explanation

変額保険は特別勘定で運用し、その運用実績に応じて保険金や解約返戻金が変動する。最低保証の有無は商品によるが、元本割れが生じ得る点が定額保険との違いである。

Question 5Life insurance products and their regulation

生命保険会社が商品を販売する際に作成する「契約概要」および「注意喚起情報」の説明として最も適切なものはどれか。

  1. 契約概要には商品の仕組みや保険料等を記載し、注意喚起情報には主なリスクや告知義務等を記載する Correct answer.
  2. 両者は同じ内容を記載するものであり、いずれか一方のみ交付すればよい
  3. 契約概要には主にリスクや注意事項を記載し、注意喚起情報には商品の仕組みを記載する
  4. 両者はいずれも契約締結後に交付するものである

Explanation

契約概要は商品の仕組みや保険料、給付内容など契約内容の理解に必要な情報を記載し、注意喚起情報は主なリスクや告知義務、解約時の取扱いなど注意すべき事項を記載する。両者は契約締結前の重要事項説明として交付される。

Question 6Life insurance products and their regulation

生命保険の告知義務に関する説明として最も適切なものはどれか。

  1. 告知は保険会社が任意に求めるものであり、答えなくても契約は有効に成立する
  2. 告知義務を怠っても契約が解除されることはない
  3. 保険契約者は医師の診断書を必ず添付しなければならない
  4. 保険契約者または被保険者は、質問事項について事実を正確に告知する義務を負う Correct answer.

Explanation

告知義務制度では、保険契約者または被保険者が保険会社の質問事項に対して事実を正確に告げる義務を負う。重要な事項について故意または重大な過失で告知しなかった場合、保険会社は契約を解除できる。

Question 7Life insurance products and their regulation

クーリング・オフ制度が適用される場面として最も適切なものはどれか。

  1. 既に保険金の支払が完了した契約
  2. 訪問販売により自宅で締結した生命保険契約 Correct answer.
  3. 生命保険会社の本店窓口で自ら申し込んだ契約
  4. 保険期間が1年以下の傷害保険契約

Explanation

クーリング・オフは訪問販売や電話勧誘販売など一定の販売形態で締結された契約について、一定期間内に無条件で撤回できる制度である。本店窓口での自発的な申込みや短期の傷害保険などは対象外とされることが一般的である。

Question 8Life insurance products and their regulation

生命保険契約における「責任開始期」の説明として最も適切なものはどれか。

  1. 保険料の払込が完了した時点で必ず責任が開始する
  2. 保険会社が契約の申込みを承諾し、告知等の条件が満たされた時点で保険会社の責任が始まる Correct answer.
  3. 契約者が契約書を受け取った時点で責任が開始する
  4. 契約の成立後1か月を経過した時点で責任が開始する

Explanation

責任開始期は、保険会社が契約を承諾し、告知や保険料の払込などの条件が整った時点で保険会社の保障責任が始まることを意味する。契約成立時期と責任開始期は必ずしも一致しない。

Question 9Life insurance products and their regulation

生命保険商品における「配当」の説明として最も適切なものはどれか。

  1. 配当は契約時に約束された固定の利息である
  2. 配当は保険会社の株主にのみ支払われる
  3. 配当は有配当保険において、剰余金の分配として契約者に支払われるものである Correct answer.
  4. 配当は必ず毎年同額が支払われる

Explanation

有配当保険では、保険会社の事業運営により生じた剰余金の一部が配当として契約者に分配される。配当額は毎期の実績により変動し、固定の利息ではない。

Question 10Life insurance products and their regulation

第三分野保険に該当するものとして最も適切なものはどれか。

  1. 医療保険 Correct answer.
  2. 養老保険
  3. 定期死亡保険
  4. 個人年金保険

Explanation

第三分野保険は、死亡保険（第一分野）でも生存保険（第二分野）でもない、医療・介護・所得保障などを保障する保険を指す。医療保険はその代表例である。

Question 11Life insurance products and their regulation

生命保険会社のソルベンシー・マージン比率に関する説明として最も適切なものはどれか。

  1. 比率は保険金支払額の合計を示す指標である
  2. 比率が高いほど保険料が安くなる指標である
  3. 比率が高いほど経営の健全性が高いとされる指標である Correct answer.
  4. 比率は契約者配当の額を示す指標である

Explanation

ソルベンシー・マージン比率は、保険会社が通常の予測を超えるリスクに対応できる余裕を示す指標であり、高いほど健全性が高いと評価される。保険料の水準や支払額、配当額を示すものではない。

Question 12Life insurance products and their regulation

生命保険商品の販売において、保険業法上の「重要事項説明」として説明すべき事項に該当するものはどれか。

  1. 代理店の売上目標
  2. 保険契約の主なリスクや告知義務の内容 Correct answer.
  3. 保険会社の社内規定の全文
  4. 保険会社の役員報酬の額

Explanation

重要事項説明では、契約概要や注意喚起情報に基づき、商品の仕組みや主なリスク、告知義務の内容など契約者が判断するために重要な事項を説明する。社内規定や役員報酬、代理店の目標は説明事項ではない。

Question 13Life insurance products and their regulation

生命保険契約の「契約者貸付」に関する説明として最も適切なものはどれか。

  1. 貸付は保険金受取人だけが利用できる
  2. 一定の範囲で解約返戻金を担保に保険会社から資金を借りられる制度である Correct answer.
  3. 貸付を受けても解約返戻金は変わらない
  4. 貸付を受けると保険契約は直ちに失効する

Explanation

契約者貸付は、解約返戻金の一定範囲内で保険契約者が保険会社から資金を借りられる制度である。未返済の貸付金は保険金や解約返戻金から差し引かれる。

Question 14Life insurance products and their regulation

生命保険会社が行う「アフターフォロー」の内容として最も適切なものはどれか。

  1. 契約者に代わって運用指図を行うこと
  2. 契約後の状況変化に応じた保障内容の見直しの提案や各種手続きの案内を行うこと Correct answer.
  3. 契約締結後の保険金支払を一切行わないこと
  4. 契約時にのみ商品説明を行うこと

Explanation

アフターフォローは、契約締結後の保障内容の確認や見直しの提案、各種手続きの案内など、契約者を継続的に支援する取組みである。契約時限りの説明や支払拒否を意味するものではない。

Question 15Life insurance products and their regulation

生命保険商品の「予定利率」を高く設定した場合に生じる一般的な影響はどれか。

  1. 契約者保護機構の資金援助が必ず受けられる
  2. 保険料には影響せず、配当だけが増加する
  3. 保険料は相対的に低くなるが、運用環境が悪化すると利差損が生じやすくなる Correct answer.
  4. 保険料は相対的に高くなり、利差益が必ず発生する

Explanation

予定利率を高く設定すると、運用収益を見込んで保険料を相対的に低く設定できる。一方で実際の運用利回りが予定利率を下回ると利差損が生じやすくなる。

Question 16Life insurance products and their regulation

生命保険会社の商品認可・届出に関する制度の説明として最も適切なものはどれか。

  1. 一定の商品は認可を要し、その他の商品は届出で足りる場合がある Correct answer.
  2. 商品の販売に行政の関与はない
  3. すべての商品が事前の認可を必要とする
  4. 商品は届出のみでよく、認可は不要である

Explanation

保険業法上、商品によって認可を要するものと届出で足りるものがあり、一定の要件を満たす商品は認可が必要とされる。すべてが届出のみ、またはすべてが認可という画一的な扱いではない。

Question 17Life insurance products and their regulation

生命保険契約における「特約」の説明として最も適切なものはどれか。

  1. 特約は契約者ではなく保険会社のみが選択できる
  2. 特約は保険料に影響しない
  3. 主契約を解約せずに付加できる、主契約を補完する保障である Correct answer.
  4. 主契約に代わって契約の全部を構成するものである

Explanation

特約は主契約に付加して保障を補完・拡充するものであり、主契約を解約せずに付加できる。特約の内容に応じて保険料が加算される。

Question 18Life insurance products and their regulation

生命保険の募集において「比較推奨販売」を行う場合に求められる対応として最も適切なものはどれか。

  1. 顧客の意向を確認せずに保険料が最も高い商品を勧める
  2. 比較した商品の情報を顧客に一切開示しない
  3. 特定の一商品のみを推奨し、他商品との比較は行わない
  4. 複数の商品を比較し、顧客の意向に沿った推奨理由を説明する Correct answer.

Explanation

比較推奨販売では、複数の商品を比較したうえで、顧客の意向に沿って特定の商品を推奨する理由を説明することが求められる。比較情報の適切な提供と意向把握が重要である。

Question 19Life insurance products and their regulation

生命保険契約の「解約返戻金」に関する説明として最も適切なものはどれか。

  1. 解約返戻金は払込保険料の全額が常に戻るものである
  2. 解約返戻金は契約を解約した際に契約者に支払われる金額で、払込保険料を下回ることがある Correct answer.
  3. 解約返戻金は契約時に確定し変動しない
  4. 解約返戻金は保険金受取人にのみ支払われる

Explanation

解約返戻金は解約時に契約者へ支払われる金額であり、契約の経過年数や予定利率、事業費などにより決まる。払込保険料の総額を下回ることもある。

Question 20Life insurance products and their regulation

生命保険会社が「保険金支払態勢」を整備する目的として最も適切なものはどれか。

  1. 契約者数を減らすため
  2. 保険料を値上げするため
  3. 保険金の支払漏れや誤払いを防ぎ、契約者への適切な支払を確保するため Correct answer.
  4. 代理店の営業成績を向上させるため

Explanation

保険金支払態勢の整備は、支払漏れや誤払いを防止し、契約者に対する適切かつ迅速な保険金支払を確保することを目的とする。保険料の値上げや契約者数の調整が目的ではない。

Question 21Life insurance company accounts and reporting

Under the insurance company accounting rules relevant to SA2, which item is recognised in the revenue account of a life insurer rather than in the balance sheet?

  1. Premiums written during the financial year Correct answer.
  2. The mathematical reserve held for in-force policies
  3. The investment fluctuation reserve
  4. Called-up share capital

Explanation

The revenue account records income and outgo for the period, so premiums written in the year flow through it. Reserves, capital and equalisation-type provisions are balance-sheet items carried forward rather than period income.

Question 22Life insurance company accounts and reporting

A life insurer writes a single-premium policy. For statutory reporting, the premium is generally recognised when:

  1. the policyholder dies or surrenders
  2. the first policy anniversary is reached
  3. the policy is issued and the premium becomes receivable Correct answer.
  4. the regulator approves the product filing

Explanation

Premium income is recognised when the insurer becomes entitled to it, i.e. when the policy is issued and the premium is due. Later events such as anniversaries, claims or approvals do not determine the recognition point.

Question 23Life insurance company accounts and reporting

Which basis is used to value the mathematical reserve for traditional life policies in statutory accounts?

  1. The surrender value guaranteed in the policy document
  2. Undiscounted future premiums without allowance for expenses
  3. A prospective or retrospective actuarial basis using prudent assumptions Correct answer.
  4. Market value of the backing assets at the reporting date

Explanation

Statutory mathematical reserves are computed on an actuarial basis, typically prospective (present value of future benefits less future premiums) or retrospective, using prudent mortality, interest and expense assumptions. Market values, gross premiums and surrender values are different concepts.

Question 24Life insurance company accounts and reporting

An insurer's revenue account shows 'claims incurred' rather than 'claims paid'. The distinction is that claims incurred:

  1. include the movement in the outstanding claims provision Correct answer.
  2. are recorded only when cash leaves the bank account
  3. exclude claims still under investigation at year end
  4. equal claims paid plus acquisition costs

Explanation

Claims incurred reflect the cost of claims arising in the period, so they combine claims paid with the change in the provision for outstanding and incurred-but-not-reported claims. Cash timing and acquisition costs are separate matters.

Question 25Life insurance company accounts and reporting

For a with-profits life fund, the amount distributed to policyholders as bonuses is treated in the revenue account as:

  1. a direct reduction of share capital
  2. an appropriation of surplus rather than an expense of the period Correct answer.
  3. an addition to deferred acquisition costs
  4. a deduction from investment income before it is reported

Explanation

Policyholder bonuses represent a distribution of the with-profits surplus to policyholders and are shown as an appropriation of the surplus rather than as an underwriting expense. They are not netted against investment income, capital or acquisition costs.

Question 26Life insurance company accounts and reporting

An insurer changes its reserving assumption for mortality from a prudent to a best-estimate basis. In the revenue account this change will typically:

  1. increase the mathematical reserve and reduce the result
  2. have no effect because reserves are balance-sheet items only
  3. release reserve and increase the result for the period Correct answer.
  4. be reported as a prior-period adjustment to retained earnings without touching the result

Explanation

A less prudent mortality assumption lowers the required mathematical reserve, and the release flows through the revenue account as an increase in the period result. Reserve changes are not confined to the balance sheet.

Question 27Life insurance company accounts and reporting

Which of the following best describes the role of the 'fund for future appropriations' in a life insurer's statutory accounts?

  1. It represents the minimum solvency margin required by the regulator
  2. It is the deferred tax liability on unrealised gains
  3. It holds surplus not yet allocated between policyholders and shareholders Correct answer.
  4. It records unpaid claims reported at the valuation date

Explanation

The fund for future appropriations captures accumulated surplus whose allocation between policyholders and shareholders has not yet been decided. It is distinct from claims provisions, solvency capital and deferred tax.

Question 28Life insurance company accounts and reporting

A life insurer's balance sheet shows a 'deferred acquisition cost' asset. This arises because:

  1. premiums received in advance are held until the cover starts
  2. commission on new business is capitalised and amortised over the policy term Correct answer.
  3. claims incurred but not reported are estimated
  4. investment gains on the shareholder fund are deferred

Explanation

Acquisition costs such as initial commission are incurred up front but relate to premiums earned over the policy term, so they are capitalised and amortised. Advance premiums, investment gains and IBNR are unrelated items.

Question 29Life insurance company accounts and reporting

How does the statutory revenue account of a life insurer treat realised gains on the sale of equity investments?

  1. They are deferred until the end of the policy term
  2. They are credited to the revenue account as investment income Correct answer.
  3. They are taken directly to share capital
  4. They are netted against claims incurred

Explanation

Realised investment gains are part of investment return and are credited to the revenue account in the period of disposal. They are not capital, not a claims offset and not deferred to policy maturity.

Question 30Life insurance company accounts and reporting

An actuary is calculating the mathematical reserve for a term assurance policy using the prospective method. Which formula correctly expresses the reserve?

  1. Face amount less the surrender value
  2. Accumulated premiums less accumulated claims
  3. Present value of future benefits less present value of future net premiums Correct answer.
  4. Gross premium multiplied by the outstanding term

Explanation

The prospective method sets the reserve equal to the present value of future benefits minus the present value of future net premiums. Accumulation, face-amount and gross-premium approaches are different or simplified methods.

Question 31Life insurance company accounts and reporting

In statutory reporting, an insurer's 'solvency margin' is best described as:

  1. the excess of admissible assets over required liabilities Correct answer.
  2. the amount of share capital issued
  3. the sum of all outstanding claims provisions
  4. the total gross premiums written in the year

Explanation

The solvency margin measures the excess of admissible assets over the liabilities and required capital, providing a buffer for policyholder obligations. It is not a premium measure, a claims total or simply issued capital.

Question 32Life insurance company accounts and reporting

Which of the following is an example of an 'admissible asset' for statutory solvency purposes?

  1. Cash held in a regulated bank account Correct answer.
  2. Goodwill arising on an acquisition
  3. Deferred acquisition costs
  4. Future premium income expected on in-force policies

Explanation

Admissible assets are realisable assets available to meet policyholder obligations, such as cash and marketable securities. Intangibles, deferred costs and future premiums are generally excluded because they cannot be realised on default.

Question 33Life insurance company accounts and reporting

A life insurer's revenue account shows a technical interest item. This represents:

  1. the interest earned on the shareholder fund
  2. the tax payable on investment income
  3. the commission paid to brokers
  4. the interest credited to policyholder reserves as part of the actuarial valuation Correct answer.

Explanation

Technical interest is the interest element credited to mathematical reserves under the valuation basis, reflecting the assumed return. It is not the shareholder fund return, tax or commission.

Question 34Life insurance company accounts and reporting

Under the statutory framework, which statement about the treatment of policyholder and shareholder funds is correct?

  1. Policyholder funds are reported as equity of the company
  2. Shareholder and policyholder funds must always be merged in the balance sheet
  3. All surplus from with-profits business belongs to shareholders
  4. With-profits policyholders are entitled to a specified share of the surplus, with the balance going to shareholders Correct answer.

Explanation

With-profits business allocates a defined share of surplus to policyholders, and the remainder accrues to shareholders, subject to the approved scheme. The funds are not simply merged, and policyholder funds are not shareholder equity.

Question 35Life insurance company accounts and reporting

An insurer's revenue account includes a line for 'change in mathematical reserves'. If reserves increase over the year, this line will:

  1. be recorded directly in equity
  2. have no effect on the result
  3. reduce the result for the year Correct answer.
  4. increase the result for the year

Explanation

An increase in mathematical reserves is an expense in the revenue account, so it reduces the period result. A decrease would release reserve and increase the result.

Question 36Life insurance company accounts and reporting

Which of the following best explains why statutory accounts use prudent reserving assumptions that differ from a best-estimate basis?

  1. To reduce the tax payable by the insurer
  2. To comply with international accounting standards
  3. To provide a margin of safety so that reserves are sufficient under adverse experience Correct answer.
  4. To maximise the dividends available to shareholders

Explanation

Prudent assumptions build in a margin so that reserves remain adequate if experience is worse than expected, protecting policyholders. The purpose is not tax reduction, dividend maximisation or IFRS compliance.

Question 37Life insurance company accounts and reporting

A life insurer writes unit-linked business. In statutory accounts, the unit-linked policyholder assets and liabilities are typically:

  1. shown separately from the non-linked funds, with the policyholder liability matching the linked assets Correct answer.
  2. merged with the shareholder fund for reporting
  3. reported as goodwill
  4. excluded from the balance sheet entirely

Explanation

Unit-linked assets are held to back unit-linked policyholder liabilities and are presented separately from non-linked business, with the liability equal to the linked asset value. They are neither excluded nor merged with shareholder funds.

Question 38Life insurance company accounts and reporting

An insurer's statutory return requires disclosure of 'incurred but not reported' claims. These are:

  1. claims for events that have occurred but were not notified by the valuation date Correct answer.
  2. claims expected from policies not yet issued
  3. claims reported but not yet paid
  4. claims that have been rejected by the insurer

Explanation

IBNR claims relate to insured events that have already happened but had not been reported to the insurer at the valuation date. They form part of the outstanding claims provision.

Question 39Life insurance company accounts and reporting

Which of the following would most likely be treated as an 'expense' in the life insurer's revenue account rather than an appropriation?

  1. A bonus allocated to with-profits policyholders
  2. Commission paid to intermediaries on new policies Correct answer.
  3. A dividend declared to shareholders
  4. A transfer to the fund for future appropriations

Explanation

Commission paid to intermediaries is an acquisition expense charged in the revenue account. Dividends, transfers to the fund for future appropriations and policyholder bonuses are appropriations of surplus.

Question 40Life insurance company accounts and reporting

A regulator requires a life insurer to maintain a minimum solvency margin of 150% of the required capital. If the required capital is 40 million and admissible assets exceed liabilities by 54 million, the insurer's solvency ratio is:

  1. 120%
  2. 135% Correct answer.
  3. 175%
  4. 150%

Explanation

The solvency ratio is available capital divided by required capital: 54 / 40 = 1.35, or 135%. This is below the 150% minimum, so the insurer would breach the requirement.

Question 41Life insurance contract design and pricing

In a without-profits whole life contract, which reserve basis generally produces the higher (more prudent) mathematical reserve?

  1. A net premium valuation using a valuation interest rate below the pricing rate and mortality at the pricing level Correct answer.
  2. A retrospective accumulation of actual premiums at the actual earned rate
  3. A net premium valuation using the pricing interest rate and pricing mortality
  4. A gross premium valuation using best-estimate assumptions with no margins

Explanation

A net premium valuation with a valuation interest rate lower than the pricing rate, and mortality no lighter than pricing, gives a reserve that anticipates future strain and is therefore more prudent. Best-estimate gross premium reserves are normally the least prudent. Using the pricing basis reproduces the prospective pricing position and yields a lower reserve.

Question 42Life insurance contract design and pricing

A life insurer designs a unit-linked contract where the policyholder bears investment risk but the insurer guarantees a minimum maturity benefit. How is this guarantee normally treated in the pricing and reserving of the contract?

  1. It is treated as a reduction in the mortality charge over the term
  2. It is priced as a put option on the underlying fund and reserved for using an option-pricing approach Correct answer.
  3. It is covered solely by the unit fund's bid-offer spread
  4. It is ignored because the policyholder bears the investment risk

Explanation

A minimum maturity guarantee is economically a put option granted to the policyholder on the underlying unit fund. Prudent pricing and reserving therefore value the guarantee with an option-pricing method and add a margin for volatility and hedging costs. The policyholder bearing market risk does not remove the insurer's guarantee liability.

Question 43Life insurance contract design and pricing

Which best describes the purpose of the zillmerised (modified) net premium reserve in a level-premium life contract?

  1. To convert a without-profits contract into a with-profits contract
  2. To remove all acquisition costs from the pricing basis
  3. To recognise initial acquisition expenses by capitalising them and amortising the resulting strain over the policy term Correct answer.
  4. To calculate the surrender value directly from the asset share

Explanation

Zillmerisation capitalises initial acquisition expenses and amortises them over the expected term, so the reserve is reduced in early years and the new business strain is spread. It is a reserving modification, not a change to the contract's profit-sharing nature. It also does not by itself determine surrender values.

Question 44Life insurance contract design and pricing

In pricing a with-profits endowment, which combination of assumptions would most increase the insurer's risk of future reserve strain?

  1. Setting a high valuation interest rate and a low expense assumption
  2. Setting a high reversionary bonus assumption and a low valuation interest rate Correct answer.
  3. Setting a low reversionary bonus assumption and a high valuation interest rate
  4. Setting a low mortality assumption and a high valuation interest rate

Explanation

Promising high reversionary bonuses while valuing liabilities at a low interest rate creates a mismatch: the insurer has committed to costly benefits but discounts them at a conservative rate, increasing the reserve requirement. The other combinations are internally consistent and reduce strain. Prudence in bonus promises relative to the valuation rate is the key control.

Question 45Life insurance contract design and pricing

What is the primary function of the asset share in the design of a with-profits contract?

  1. It records the accumulated value of premiums less claims, expenses and charges attributable to a group of policies Correct answer.
  2. It determines the maximum premium the insurer may charge
  3. It replaces the need for a valuation actuary
  4. It sets the statutory minimum solvency capital

Explanation

The asset share accumulates premiums at the earned investment return, deducting claims, expenses and charges, and represents the funds attributable to the policy group. It informs bonus decisions and surrender value setting. It is neither a solvency capital measure nor a premium ceiling.

Question 46Life insurance contract design and pricing

An insurer prices a term assurance contract using a mortality assumption that turns out to be materially too light. Which consequence is most likely?

  1. Surrender values will automatically rise above the asset share
  2. Reserves will be released and profits emerge earlier than expected
  3. Actual claims will exceed priced claims, producing losses and possible reserve strengthening Correct answer.
  4. The contract will become a with-profits policy by operation of law

Explanation

If mortality is heavier than assumed, actual death claims exceed those priced into the premium, so the contract makes losses and reserves may need strengthening. Mortality assumptions are a core pricing input for protection business. The other outcomes do not follow from adverse mortality experience.

Question 47Life insurance contract design and pricing

Which expense assumption category is most likely to be underestimated when pricing a new life product with a short distribution history?

  1. Initial acquisition costs such as underwriting, medical evidence and distribution Correct answer.
  2. Claim settlement costs, which are fixed per claim
  3. Renewal commission, which is fixed by regulation
  4. Investment management fees, which are set by the fund manager

Explanation

Initial acquisition costs, including underwriting, medical evidence and distribution, are the most uncertain and often underestimated for new products. Renewal commission and investment fees are typically contractually or regulatorily set. Claim settlement costs are usually estimable per claim.

Question 48Life insurance contract design and pricing

Which statement best describes the role of the valuation interest rate in a net premium reserve calculation?

  1. It is the rate used to calculate surrender values
  2. It is the minimum rate guaranteed to policyholders under the contract
  3. It is the rate at which future net premiums and benefits are discounted to determine the reserve Correct answer.
  4. It is the rate actually earned on the insurer's assets in the past year

Explanation

The valuation interest rate is the discount rate applied to future net premiums and benefits when computing the prospective reserve. It is a valuation assumption, not the historical earned rate, the surrender basis, or the contractual guaranteed rate. Prudence requires it to be set conservatively relative to expected returns.

Question 49Life insurance contract design and pricing

A life insurer is designing a product with a guaranteed annuity rate option. Why is this option particularly costly to reserve for?

  1. It removes all mortality risk from the contract
  2. It guarantees the policyholder a minimum investment return
  3. It exposes the insurer to the risk that interest rates and annuity rates move adversely before the option is exercised Correct answer.
  4. It eliminates the need for expense assumptions

Explanation

A guaranteed annuity rate option gives the policyholder the right to convert at a pre-agreed rate, so the insurer bears the risk that market annuity rates and interest rates move adversely before exercise. This option-like exposure requires explicit reserving and hedging. It does not eliminate mortality or expense risk.

Question 50Life insurance contract design and pricing

Which factor most directly determines the level of the mortality charge in a unit-linked protection contract?

  1. The policyholder's chosen fund allocation
  2. The fund's bid-offer spread
  3. The expected mortality cost of the sum at risk, adjusted for expenses and profit margin Correct answer.
  4. The valuation interest rate used for the non-unit reserve

Explanation

The mortality charge recovers the expected cost of the death benefit in excess of the unit fund (the sum at risk), plus expenses and profit margin. Fund allocation and spreads affect the unit fund value but not the charge for mortality risk. The valuation interest rate affects reserves, not the charge design directly.