Download AIAF QUESTION BANK 2026 ANALYTICAL METHODS REVIEW UPDATED A+ and more Exams Finance in PDF only on Docsity!
AIAF QUESTION BANK 2026 ANALYTICAL
METHODS REVIEW UPDATED A+
โ Economic capital differs from other types of regulatory capital in that it is based not on a ______ but on ____ _____ _____ of the firm's assets and liabilities Answer: not on formula, but fair market value; this takes into account their variability โ Fair value accounting differs from the (GAAP) and (SAP) used by insurers in the United States, both of which use _______ values at times Answer: nonmarket โ Under GAAP, an organization's net worth (assets less liabilities) is often called ______; under SAP, an insurer's net worth is called ________
Answer: GAAP: equity; SAP: policyholders' surplus โ ________ _____ refers to delays in receiving payments Answer: Collections float
โ _______ _____ refers to delays in issuing payments Answer: disbursement float โ Which of these can reduce mail float: A. A lockbox maintained by a third party B. Allowing customers to pay by computer or mobile app C. Zero-balance accounts D. A & B E. A & C F. B & C G. All of the above Answer: D. A & B zero-balance accounts ( and concentration accounts) prevent early disbursement issues โ This cost of equity model values an asset as the present value of all future cash flows from that asset in perpetuity Answer: discounted cash flow (DCF) โ When applied to equities, this cost of equity model is sometimes called the dividend growth mode
โ TRUE/FALSE: The amount of capital raised by writing insurance policies is the total of the insurer's unearned premium Answer: FALSE: insurer's unearned premium, loss, and loss adjustment expense reserves โ This ISO series focuses on quality management, including assurances regarding regulatory compliance Answer: ISO 9000 โ This ISO/IEC (International Electrotechnical Commission) series focuses on information-security management systems Answer: ISO 27000 โ This IIA standard directs the internal auditor to evaluate the effectiveness of the risk management program and to contribute to the improvement of the risk assessment process Answer: standard # โ The Control Risk Self-Assessment Model (CRSA) relies on risk management assessment from who? Answer: business unit managers and employees โ This type of Insurance-linked security mimics traditional excess insurance and reinsurance
Answer: catastrophe bonds โ An insurance _______ is a financial contract whose value is based on the level of insurable losses that occur during a specific time period Answer: derivative โ The key within this internal risk category is risk appetite Answer: Liquidity/solvency โ A realistic risk _______ and internal risk _____ that's aligned with business objectives aids an insurers efforts with internal liquidity/solvency risk Answer: realistic risk assessment and internal risk profile โ Modeling, including for stress scenarios, can help determine risk appetite relative to _______ and risk ______ Answer: capital and risk portfolio โ This internal risk assessment should evaluate how well the duration of assets is matched with that of liabilities Answer: Liquidity/solvency
โ Under Basel III, who should identify the operational risk in all products, processes, and systems to make sure the risks and incentives are well understood. Answer: Senior management โ Under Basel III, who should approve a risk appetite and tolerance statement that articulates the nature, types, and levels of operational risk that the bank is willing to assume Answer: board of directors โ Under Basel III, who should implement processes so operational risk profiles and exposures to losses are monitored regularly Answer: Senior management - Reports should then be provided to the board, senior management, and business line levels โ Solvency II has three pillars. The first deals with ________ requirements of capital based on each insurer's specific circumstances. Answer: quantitative โ Solvency II has three pillars. The first includes a solvency capital requirement akin to ________ capital Answer: economic
โ An insurer's market value surplus is the ____ value of it's assets, less the ______ value of it's liabilities, plus a _____ ______ _____ that represents the compensation an investor would need to take the risk of the liabilities Answer: Fair value of assets - (Present value of liabilities + market value margin) โ MVS can be considered a risk-adjusted form of policyholders' surplus because a ____ _____ ____ is added to the present value of liabilities Answer: market value margin โ Both economic capital and risk-based capital attempt to quantify this risk, losses caused by improper matching of asset and liability cash flows Answer: Liquidity risk โ Both economic capital and risk-based capital attempt to quantify this risk, which is defined as the potential for adverse loss experience, including catastrophic losses Answer: Insurance risk โ Both economic capital and risk-based capital attempt to quantify this risk, one example being failed internal processes caused by data system problems
โ TRUE/FALSE: An advantage of economic capital is that fair value is unaffected to short term market forces Answer: FALSE: fair value produces changes in MVS based on short- term market forces rather than those affecting the company's ability to operate on an ongoing basis โ This form of capital analysis puts a value on an organization's overall level of risk Answer: Economic capital โ This form of risk based capital focuses attention on the risks attached to an organization's various activities and can help define an organization's risk tolerance Answer: economic capital โ This COSO component sets the tone for internal control by providing resources, discipline, and structure Answer: Control environment โ This COSO component identifies and measures risks that threaten the organization's objectives Answer: Risk assessment
โ This COSO component is a collection of policies, procedures, and practices enacted to carry out the management objectives and risk mitigation goals Answer: Control activities โ This COSO component refers to systems or processes that delegate control responsibilities in a manner that enables responsibilities to be met Answer: Information and communication โ This COSO component refers to either external oversight or the internal application of independent methodologies, such as customized procedures or standard checklists; reinforces adherence to the controls in place Answer: Monitoring activities
