IAI SP7 flashcards
IAI SP7 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Claims development triangle
- A table of cumulative claims by accident year and development period, used to estimate future development and ultimate losses.
- Chain ladder factor
- The ratio of cumulative claims at one development period to the prior period, summed across accident years, used to project future claims.
- Bornhuetter-Ferguson method
- A reserving method adding reported claims to an expected ultimate loss multiplied by the unreported proportion, blending observed development with an external loss ratio.
- IBNR reserves
- Reserves for claims incurred but not reported plus expected development on known claims, calculated as ultimate losses less paid and case reserves.
- Case reserves
- Estimates held for individual reported claims, set by claims handlers, representing expected future payments on those known claims before any IBNR.
- Expected loss ratio method
- A reserving approach multiplying earned premium by a selected ultimate loss ratio, often used when claims data are sparse or immature.
- Risk margin
- An additional amount above best-estimate liabilities to compensate an insurer for bearing insurance risk, often calculated using a cost-of-capital approach.
- Reserve uncertainty
- The potential variation between estimated and ultimate claim costs, arising from process variance, parameter error and model error, often expressed as a range.
- Solvency capital requirement
- The capital needed to absorb adverse events over a one-year horizon at a specified confidence level, often 99.5%, under a risk-based solvency regime.
- Minimum capital requirement
- A lower solvency threshold below which supervisory intervention is triggered, representing the minimum capital needed to operate as an insurer.
- Internal model use test
- Evidence that an insurer uses its internal model in decision-making, risk management and capital allocation, not merely for regulatory calculation.
- Own risk solvency assessment
- A forward-looking insurer assessment of risks, capital needs and solvency under normal and stressed conditions over the business planning horizon.
- Risk appetite statement
- A formal statement of the amount and types of risk an insurer is willing to accept, linked to capital, strategy and risk limits.
- Diversification benefit
- The reduction in total capital from aggregating risks with imperfect correlation, because losses are unlikely to peak simultaneously across all risk modules.
- Tier 1 capital
- Highest-quality capital, such as ordinary share capital and retained earnings, fully available to absorb losses on a going-concern basis.
- Reverse stress test
- A test identifying scenarios that would exhaust capital or breach solvency, helping an insurer understand vulnerabilities beyond plausible ordinary stresses.
- Quota share treaty
- A proportional reinsurance arrangement where the cedent cedes a fixed percentage of premiums and losses for covered policies to the reinsurer.
- Surplus treaty
- A proportional treaty where the cedent retains a fixed amount per risk and cedes the excess up to a specified number of lines.
- Excess of loss
- A non-proportional reinsurance cover where the reinsurer pays losses above a retention up to a limit, often per risk or per event.
- Stop loss reinsurance
- A non-proportional cover protecting the cedent's aggregate losses or loss ratio above a retention, usually over an annual period.
- Facultative reinsurance
- Reinsurance negotiated for an individual risk, allowing the reinsurer to accept or decline each submission separately from any treaty.
- Risk transfer test
- An assessment of whether a reinsurance contract transfers significant insurance risk, determining whether reinsurance or deposit accounting applies.
- Reinsurance recoverable
- The amount an insurer expects to recover from reinsurers for ceded claims, recognised as an asset subject to credit risk and collectability review.
- Reinstatement premium
- An additional premium paid by the cedent to restore reinsurance cover after a loss, often proportional to the amount and layer reinstated.
- Appointed actuary
- A qualified actuary appointed by an insurer to provide actuarial advice on reserves, capital and financial condition, with statutory responsibilities in some regimes.
- IRDAI
- The Insurance Regulatory and Development Authority of India, which supervises insurers, sets solvency and reporting requirements, and regulates actuarial practice.
- IFRS 17
- An international accounting standard for insurance contracts using fulfilment cash flows, contractual service margin and risk adjustment for profit recognition.
- Contractual service margin
- The unearned profit in an insurance contract under IFRS 17, released to profit as services are provided over the coverage period.
- Risk adjustment
- The compensation an insurer requires for bearing non-financial risk under IFRS 17, reflecting the uncertainty in fulfilment cash flows.
- Actuarial standards
- Professional requirements governing actuarial work, including data quality, assumptions, documentation and communication of results to users.
- Solvency ratio
- An insurer's available capital divided by required capital, often expressed as a percentage, indicating the margin above regulatory solvency requirements.
- Professional scepticism
- An attitude of questioning assumptions and evidence, avoiding bias, and challenging data or models before relying on results in actuarial work.