Question 1

What represents the amounts needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before a particular date?

Accepted Answer

Claim adjustment expenses represent the amounts needed to cover the estimated ultimate cost of settling claims for insured events that have occurred on or before a specific date.

Question 2

The highest and best use of the asset is ______________, if the asset would provide maximum value to market participants principally on the standalone basis.

Accepted Answer

The term "in-exchange" refers to the highest and best use of an asset when it provides maximum value to market participants on a standalone basis, rather than being used in combination with other assets.

Question 3

An entity's practices concerning loss settlement, such as a practice of vigorously defending suits or of quickly settling suits, can have a significant effect on an entity's loss experience.

Accepted Answer

An entity's approach to handling claims, whether through aggressive defense or prompt settlement, can influence the frequency and cost of claims, thereby impacting its overall loss experience.

Question 4

Procedures for ensuring that the data used by the loss reserve specialist is completed and accurate due to:

Accepted Answer

Controls over the preparation of supporting data ensure that the data used by the loss reserve specialist is complete and accurate, as they focus on verifying and validating the data that supports the estimates and decisions.

Question 5

is the price in a hypothetical transaction at the measurement date in the market in which the reporting entity would transact for the asset or liability

Accepted Answer

The correct term for the price in a hypothetical transaction at the measurement date in the market in which the reporting entity would transact for the asset or liability is the "Exchange price."

Question 6

What represent legal agreements between buyers or sellers and represent commitments to buy or sell financial instruments at specified dates and prices?

Accepted Answer

Future contracts are legal agreements to buy or sell financial instruments at specified dates and prices.

Question 7

To avoid double counting or omitting the effects of risks factors what should reflect assumptions that are consistent with those inherent in the cash flows?

Accepted Answer

Discount rates should reflect assumptions consistent with those inherent in the cash flows to avoid double counting or omitting the effects of risk factors.

Question 8

The two most common types of dollar rolls are:

Accepted Answer

Fixed-coupon and yield-maintenance agreements are the two most common types of dollar rolls, which are financial transactions involving the sale and subsequent repurchase of a security, typically used in the mortgage-backed securities market.

Question 9

The method which assumes that an entity's experience in estimating case-basis reserves will be repeated in the future is called:

Accepted Answer

The reported loss development projection method assumes that past patterns of reported losses will continue into the future, reflecting the entity's experience in estimating reserves.

Question 10

In which of the following, Internal entity experience or information from published sources concerning recent trends in socioeconomic factors affecting claim payments:

Accepted Answer

All of the options listed (general inflation rates, judicial decisions assessing liability, and judicial decisions regarding noneconomic damages) are examples of socioeconomic factors that can affect claim payments.

Question 11

A change in _______ or its application is appropriate if the change results in a measurement that is equally or more representative of fair value in the circumstances.

Accepted Answer

A change in valuation technique is appropriate if the change results in a measurement that is equally or more representative of fair value in the circumstances.

Question 12

What is made on an instrument-by-instrument basis, generally when an instrument is initially recognized in the financial statements?

Accepted Answer

An election is made on an instrument-by-instrument basis, generally when an instrument is initially recognized in the financial statements, to determine how it will be accounted for.

Question 13

For reinsurance assumed, the concepts analogous to attachment points and limits are referred to as

Accepted Answer

In reinsurance, the retention level is analogous to the attachment point, as it represents the amount the ceding insurer retains before the reinsurance coverage begins.

Question 14

What limits the repurchase price to a stipulated percentage of the face amount of the certificate?

Accepted Answer

The answer of What limits the repurchase price to a...

Exam 1: Accredited Financial Examiner