Question 1

SOARS stands for Supervisory Oversight and Regulations System.

Accepted Answer

A) True 
 B)False  False

Question 2

Insurance policy benefits are classified on an insurance company's balance sheet as:

Accepted Answer

A)  liabilities, because the insurance company may have to pay out the benefits. 
B)  assets, because policy benefits are valuable to the company. 
C)  liabilities, because customers may fall behind on their premium payments. 
D)  assets, because policy benefits are fully covered by premium payments. 
A)  liabilities, because the insurance company may have to pay out the benefits. 
B)  assets, because policy benefits are valuable to the company. 
C)  liabilities, because customers may fall behind on their premium payments. 
D)  assets, because policy benefits are fully covered by premium payments. A

Question 3

Which of the following statements is true?

Accepted Answer

A)  Finance companies are financial institutions that raise funds through the issue of debentures and unsecured notes from retail investors. 
B)  Finance companies are financial institutions that raise funds through the issue of debentures and unsecured notes from wholesale investors. 
C)  Finance companies are financial institutions that raise funds through the issue of T-bonds and secured notes from retail investors. 
D)  Finance companies are financial institutions that raise funds through the issue of T-bonds and secured notes from wholesale investors. 
A)  Finance companies are financial institutions that raise funds through the issue of debentures and unsecured notes from retail investors. 
B)  Finance companies are financial institutions that raise funds through the issue of debentures and unsecured notes from wholesale investors. 
C)  Finance companies are financial institutions that raise funds through the issue of T-bonds and secured notes from retail investors. 
D)  Finance companies are financial institutions that raise funds through the issue of T-bonds and secured notes from wholesale investors. A

Question 4

Outline and briefly explain the different classes of life insurance as set out in the Life Insurance Act 1995.

Accepted Answer

There are two basic classes of life insu

Question 5

Which of the following statements are true in the context of general insurance?

Accepted Answer

A)  Loss rates on all general property policies are adversely affected by unexpected increases in inflation. 
B)  Long-tail losses arise where the peril occurs during a coverage period but a claim is not made until many years later. 
C)  Long-tail losses arise where the peril occurs during a coverage period but a claim is not made until many years later and loss rates are more predictable on low-severity high-frequency lines than on high-severity low-frequency lines. 
D)  Loss rates on all general property policies are adversely affected by unexpected increases in inflation, long-tail losses arise where the peril occurs during a coverage period but a claim is not made until many years later and loss rates are more predictable on low-severity high-frequency lines than on high-severity low-frequency lines. 
A)  Loss rates on all general property policies are adversely affected by unexpected increases in inflation. 
B)  Long-tail losses arise where the peril occurs during a coverage period but a claim is not made until many years later. 
C)  Long-tail losses arise where the peril occurs during a coverage period but a claim is not made until many years later and loss rates are more predictable on low-severity high-frequency lines than on high-severity low-frequency lines. 
D)  Loss rates on all general property policies are adversely affected by unexpected increases in inflation, long-tail losses arise where the peril occurs during a coverage period but a claim is not made until many years later and loss rates are more predictable on low-severity high-frequency lines than on high-severity low-frequency lines.

Question 6

Insurance companies are not subject to regulatory capital adequacy rules.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following are reasons for underwriting risk to result?

Accepted Answer

A)  Generated premiums are insufficient to cover claims incurred insuring a particular peril. 
B)  Generated premiums are insufficient to cover the administrative expenses of providing that insurance after taking into account the investment income generated between the time premiums are received and the time claims are paid. 
C)  Generated premiums are insufficient to cover ordinary business expenses. 
D)  Generated premiums are insufficient to cover claims incurred insuring a particular peril and generated premiums are insufficient to cover the administrative expenses of providing that insurance after taking into account the investment income generated between the time premiums are received and the time claims are paid. 
A)  Generated premiums are insufficient to cover claims incurred insuring a particular peril. 
B)  Generated premiums are insufficient to cover the administrative expenses of providing that insurance after taking into account the investment income generated between the time premiums are received and the time claims are paid. 
C)  Generated premiums are insufficient to cover ordinary business expenses. 
D)  Generated premiums are insufficient to cover claims incurred insuring a particular peril and generated premiums are insufficient to cover the administrative expenses of providing that insurance after taking into account the investment income generated between the time premiums are received and the time claims are paid.

Question 8

The primary function of insurance companies is to:

Accepted Answer

A)  generate fees for the banks that sell insurance products. 
B)  sell a variety of consumer investment products. 
C)  protect policyholders from adverse events. 
D)  assist in the transfer of wealth into the future. 
A)  generate fees for the banks that sell insurance products. 
B)  sell a variety of consumer investment products. 
C)  protect policyholders from adverse events. 
D)  assist in the transfer of wealth into the future.

Question 9

Which of the following is an adequate definition of liability insurance?

Accepted Answer

A)  Liability insurance protects commercial firms against perils similar to home-owners' multiple peril insurance 
B)  Liability insurance protects against theft or damage of commercial vehicles. 
C)  Liability insurance protects against liabilities relating to business operations of firms. 
D)  Liability insurance protects commercial firms against perils similar to home-owners' multiple peril insurance and protects against liabilities relating to business operations of firms. 
A)  Liability insurance protects commercial firms against perils similar to home-owners' multiple peril insurance 
B)  Liability insurance protects against theft or damage of commercial vehicles. 
C)  Liability insurance protects against liabilities relating to business operations of firms. 
D)  Liability insurance protects commercial firms against perils similar to home-owners' multiple peril insurance and protects against liabilities relating to business operations of firms.

Question 10

Which of the following are basic life insurance contract types?

Accepted Answer

A)  terminating insurance 
B)  whole of life 
C)  bundled life insurance 
D)  terminating insurance and whole of life 
A)  terminating insurance 
B)  whole of life 
C)  bundled life insurance 
D)  terminating insurance and whole of life

Question 11

Which of the following statements is true with regard to the regulation of managed funds?

Accepted Answer

A)  Managed funds are unregulated. 
B)  APRA is the primary regulator for managed funds. 
C)  ASIC is the primary regulator for managed funds. 
D)  The ACCC is the primary regulator for managed funds. 
A)  Managed funds are unregulated. 
B)  APRA is the primary regulator for managed funds. 
C)  ASIC is the primary regulator for managed funds. 
D)  The ACCC is the primary regulator for managed funds.

Question 12

Which of the following statements is true?

Accepted Answer

A)  Money market corporations are primarily concerned with wholesale deposit raising and lending. 
B)  Money market corporations are primarily concerned with retail deposit raising and lending. 
C)  Money market corporations are financial intermediaries that cover a large number of activities. 
D)  Money market corporations are financial intermediaries that cover a large number of activities and are primarily concerned with wholesale deposit raising and lending. 
A)  Money market corporations are primarily concerned with wholesale deposit raising and lending. 
B)  Money market corporations are primarily concerned with retail deposit raising and lending. 
C)  Money market corporations are financial intermediaries that cover a large number of activities. 
D)  Money market corporations are financial intermediaries that cover a large number of activities and are primarily concerned with wholesale deposit raising and lending.

Question 13

Which of the following statements is true?

Accepted Answer

A)  The proceeds of life insurance policies are tax free after they have been in force for at least 5 years. 
B)  The proceeds of life insurance policies are tax free after they have been in force for at least 10 years. 
C)  The proceeds of life insurance policies are tax free after they have been in force for at least 15 years. 
D)  The proceeds of life insurance policies are always taxed. 
A)  The proceeds of life insurance policies are tax free after they have been in force for at least 5 years. 
B)  The proceeds of life insurance policies are tax free after they have been in force for at least 10 years. 
C)  The proceeds of life insurance policies are tax free after they have been in force for at least 15 years. 
D)  The proceeds of life insurance policies are always taxed.

Question 14

Which of the following statements is true?

Accepted Answer

A)  Pure arbitrage involves buying blocks of securities in anticipation of some information release. 
B)  Risk arbitrage involves buying an asset in one market at one price and selling it immediately in another market at a higher price. 
C)  Pure arbitrage involves buying blocks of securities in anticipation of some information release, risk arbitrage involves buying an asset in one market at one price and selling it immediately in another market at a higher price and program trading is associated with seeking a pure arbitrage between a cash market price and the futures market price of that instrument. 
D)  None of the listed options are correct. 
A)  Pure arbitrage involves buying blocks of securities in anticipation of some information release. 
B)  Risk arbitrage involves buying an asset in one market at one price and selling it immediately in another market at a higher price. 
C)  Pure arbitrage involves buying blocks of securities in anticipation of some information release, risk arbitrage involves buying an asset in one market at one price and selling it immediately in another market at a higher price and program trading is associated with seeking a pure arbitrage between a cash market price and the futures market price of that instrument. 
D)  None of the listed options are correct.

Question 15

Which of the following statements is true?

Accepted Answer

A)  A closed-end investment company is a specialised firm that invests in securities and assets of other firms. 
B)  A closed-end investment company is a specialised firm that invests in securities and assets of other firms but has a fixed supply of shares outstanding itself. 
C)  A closed-end investment company is a specialised firm that invests in securities and assets of other firms but has a variable supply of shares outstanding itself. 
D)  A closed-end investment company has a variable supply of shares outstanding itself. 
A)  A closed-end investment company is a specialised firm that invests in securities and assets of other firms. 
B)  A closed-end investment company is a specialised firm that invests in securities and assets of other firms but has a fixed supply of shares outstanding itself. 
C)  A closed-end investment company is a specialised firm that invests in securities and assets of other firms but has a variable supply of shares outstanding itself. 
D)  A closed-end investment company has a variable supply of shares outstanding itself.

Question 16

Which of the following statements is true?

Accepted Answer

A)  Measuring and managing credit and interest rate risk are key concerns of general insurance managers. 
B)  If pure losses, underwriting losses and other costs are higher and investment yields lower than expected, general insurers suffer a significant amount of deficit reserves. 
C)  On average, underwriting cycles measured from peak to peak can last anywhere from 12 to 20 years. 
D)  Measuring and managing credit and interest rate risk are key concerns of general insurance managers and if pure losses, underwriting losses and other costs are higher and investment yields lower than expected, general insurers suffer a significant amount of deficit reserves. 
A)  Measuring and managing credit and interest rate risk are key concerns of general insurance managers. 
B)  If pure losses, underwriting losses and other costs are higher and investment yields lower than expected, general insurers suffer a significant amount of deficit reserves. 
C)  On average, underwriting cycles measured from peak to peak can last anywhere from 12 to 20 years. 
D)  Measuring and managing credit and interest rate risk are key concerns of general insurance managers and if pure losses, underwriting losses and other costs are higher and investment yields lower than expected, general insurers suffer a significant amount of deficit reserves.

Question 17

Which of the following statements is true?

Accepted Answer

A)  The cash surrender value of a policy is normally only a portion of the contract's face value. 
B)  The cash surrender value of a policy is normally equal to the contract's face value. 
C)  The cash surrender value of a policy is normally more than the contract's face value. 
D)  A generalisation of the cash surrender value of a policy in relation to its face value is not possible. 
A)  The cash surrender value of a policy is normally only a portion of the contract's face value. 
B)  The cash surrender value of a policy is normally equal to the contract's face value. 
C)  The cash surrender value of a policy is normally more than the contract's face value. 
D)  A generalisation of the cash surrender value of a policy in relation to its face value is not possible.

Question 18

Higher uncertainty of losses forces property-casualty firms to:

Accepted Answer

A)  invest in more short-term assets than life insurance firms. 
B)  invest in more long-term assets than life insurance firms. 
C)  hold a lower percentage of capital and reserves than life insurance firms. 
D)  invest in riskier equity securities than life insurance firms. 
A)  invest in more short-term assets than life insurance firms. 
B)  invest in more long-term assets than life insurance firms. 
C)  hold a lower percentage of capital and reserves than life insurance firms. 
D)  invest in riskier equity securities than life insurance firms.

Question 19

In general, the maximum levels of losses are less predictable for property lines than liability lines.

Accepted Answer

A) True 
 B)False

Question 20

Loans on policy are loans made by insurance companies to its policy holders using their policies as collateral.

Accepted Answer

A) True 
 B)False

SOARS stands for Supervisory Oversight and Regulations System.

Insurance policy benefits are classified on an insurance company's balance sheet as:

Which of the following statements is true?

Outline and briefly explain the different classes of life insurance as set out in the Life Insurance Act 1995.

Which of the following statements are true in the context of general insurance?

Insurance companies are not subject to regulatory capital adequacy rules.

Which of the following are reasons for underwriting risk to result?

The primary function of insurance companies is to:

Which of the following is an adequate definition of liability insurance?

Which of the following are basic life insurance contract types?

Which of the following statements is true with regard to the regulation of managed funds?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Higher uncertainty of losses forces property-casualty firms to:

In general, the maximum levels of losses are less predictable for property lines than liability lines.

Loans on policy are loans made by insurance companies to its policy holders using their policies as collateral.

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 3: The Financial Services Industry: Other Financial Institutions

SOARS stands for Supervisory Oversight and Regulations System.

Insurance policy benefits are classified on an insurance company's balance sheet as:

Which of the following statements is true?

Outline and briefly explain the different classes of life insurance as set out in the Life Insurance Act 1995.

Which of the following statements are true in the context of general insurance?

Insurance companies are not subject to regulatory capital adequacy rules.

Which of the following are reasons for underwriting risk to result?

The primary function of insurance companies is to:

Which of the following is an adequate definition of liability insurance?

Which of the following are basic life insurance contract types?

Which of the following statements is true with regard to the regulation of managed funds?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Which of the following statements is true?

Higher uncertainty of losses forces property-casualty firms to:

In general, the maximum levels of losses are less predictable for property lines than liability lines.

Loans on policy are loans made by insurance companies to its policy holders using their policies as collateral.

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters