Question 1

Insurance entities usually write covered-call options because they consider the premium received for writing the options to be either:

Accepted Answer

The answer of Insurance entities usually write covered-call options because...

Question 2

Inflation in Defense & Cost Containment (DCC) is evaluated separately and is estimated to occur at the same rate as the rate of inflation in the losses.

Accepted Answer

Inflation in Defense & Cost Containment (DCC) is typically evaluated separately from the rate of inflation in losses, as they can be influenced by different factors and may not occur at the same rate.

Question 3

The loss reserve estimate is a significant estimate in the financial statements of an uninsured entity.

Accepted Answer

Loss reserve estimates are significant for insured entities, as they represent the estimated amount needed to settle future claims. Uninsured entities do not have such reserves.

Question 4

Which of the following is NOT the date that is the key to classify the chronology of the data?

Accepted Answer

Reinsurance date is not typically used to classify the chronology of data in insurance contexts, unlike policy, accident, and report dates which are crucial for determining timelines and processing claims.

Question 5

A basic premise underlying the application of is that it is reasonable to assume that plausible relationships among data exist and continue in the absence of known conditions to the contrary.

Accepted Answer

Analytical procedures are based on the premise that plausible relationships among data exist and will continue unless there are known conditions that would alter these relationships.

Question 6

Extrapolation of historical dollars, projection of separate frequency data, use of expected loss ratios are all projection methods for:

Accepted Answer

These methods are used in actuarial science to estimate the reserves needed for future claims based on past data.

Question 7

With which standard, the auditor's substantive procedures must include reconciling the financial statements to the accounting records and should include examining material adjustments made during the course of preparing the financial statements.

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB) standards require auditors to perform substantive procedures, including reconciling financial statements to accounting records and examining material adjustments.

Question 8

The market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity for the asset or liability is known as:

Accepted Answer

The principal market is defined as the market with the greatest volume and level of activity for the asset or liability, where the reporting entity would typically sell the asset or transfer the liability.

Question 9

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date is called:

Accepted Answer

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Question 10

Which of the following is NOT the way to make changes in variables that can be considered in the loss reserving process?

Accepted Answer

Segregation of new data is not a method for making changes in variables for loss reserving; it involves separating data rather than adjusting or analyzing it for projections.

Question 11

The evaluation and subsequent purchase or sale of investments is based on the judgment of the entity's investment and finance committees.

Accepted Answer

Investment and finance committees are typically responsible for evaluating and making decisions regarding the purchase or sale of investments within an organization.

Question 12

The date on which the contract becomes effective is known as _.

Accepted Answer

The policy date is the date on which the contract becomes effective.

Question 13

Average severities projection method uses various claim count and average cost per claim date on either a paid or insured basis.

Accepted Answer

The average severities projection method involves analyzing historical data on claim counts and the average cost per claim to estimate future claims, using either paid or incurred data.

Question 14

_______ is contractual right of recovery that entitles the insurer to any proceeds from the disposal of damaged property for which the claim has been made.

Accepted Answer

Salvage is the contractual right of recovery that allows the insurer to take possession of damaged property and any proceeds from its disposal after a claim has been paid.

Question 15

What method assumes that an entity's historical experience relating to the timeliness of settlement will be predictive of future results?

Accepted Answer

The paid loss projection method assumes that historical patterns of claim payments will continue into the future, making it predictive of future settlement timeliness.

Question 16

Which of the following is Correct?

Accepted Answer

The answer of Which of the following is Correct?
...

Question 17

The estimated amount receivable from third parties from whom the insured may have the right to recover damages is known as:

Accepted Answer

The term "reduction for subrogation" refers to the estimated amount that an insurer can recover from third parties responsible for causing a loss, which reduces the insurer's liability.

Question 18

What must be properly coded to meet the statutory reporting requirements of the annual statement and to provide statistics to support filling?

Accepted Answer

Claims data must be properly coded to meet the statutory reporting requirements of the annual statement and to provide statistics to support filing. The insurance act, risk estimation, and claim settlement are important aspects of insurance, but do not directly relate to coding for statutory reporting requirements.

Question 19

A lower net retention level typically would translate into a higher v\variability of reserves.

Accepted Answer

A lower net retention level means the insurer retains less risk, which typically reduces the variability of reserves as more risk is transferred to reinsurers.

Question 20

What encompasses investment income and gains and losses, as well as custody of investment and recordkeeping?

Accepted Answer

The transaction cycle includes investment income, gains and losses, custody of investment, and recordkeeping.

Exam 1: Accredited Financial Examiner