Question 1

Reduction for salvage is:

Accepted Answer

A)  the estimated amount payable by the vendor from the disposition of damaged or recovered property 
B)  the actual amount receivable by the claimer from the temperament of damaged property 
C)  the actual amount payable by the investor from the disposition of damaged or recovered property 
D)  the estimated amount receivable by the insurer from the disposition of damaged or recovered property

Question 2

______ is used when the rates for large or usual risks are established almost entirely by the skill and experience of the rate maker.

Accepted Answer

A)  Expertise rating 
B)  Premium rating 
C)  Class rating 
D)  Individual rating

Question 3

What confirms the hypothesized interest rate sensitivities and shows that the two lines of business are fairly complementary?

Accepted Answer

A)  Harmonizing graph 
B)  Balance curve 
C)  Price behavior curve 
D)  List pricing graph

Question 4

What uses valuation techniques to convert future amounts to a single present amount?

Accepted Answer

A)  Risk approach 
B)  Market approach 
C)  Income approach 
D)  Cost approach

Question 5

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

Accepted Answer

A)  policy date 
B)  report date 
C)  reinsurance date 
D)  record date

Question 6

Admitted assets are those specifically prescribed by the NAIC Accounting Practices and Procedures Manual or prescribed or permitted by the various jurisdictions. An admitted asset is defined as having probable future economic benefits. It also has three essential characteristics. Which one of the following is out of those characteristics?

Accepted Answer

A)  It embodies a probable future benefit which contributes to cash flow 
B)  A particular entity can obtain this benefit 
C)  The transaction giving rise to entity's right to control the benefit has already occurred 
D)  All of these

Question 7

Which risk assessment procedures are used to obtain an understanding of the entity and its environment, including its internal control?

Accepted Answer

A)  Inquiries of management 
B)  Analytical procedures 
C)  Observation 
D)  All of the above

Question 8

The combined ratio is the sum of it:

Accepted Answer

A)  loss ratio 
B)  expense ratio 
C)  dividend ratio 
D)  All of the above

Question 9

Final approval should be obtained prior to placing a new system into operation is the activity that can be fall into which control?

Accepted Answer

A)  Organizations and operations control 
B)  System development control 
C)  Access control 
D)  Procedural control

Question 10

Outgoing premiums less return premiums arising from reinsurance purchased from other insurance entities are called:

Accepted Answer

A)  Rating premiums 
B)  Direct premiums 
C)  Assumed reinsurance premiums 
D)  Ceded reinsurance premiums

Question 11

Valuation technique should be used to measure fair value and is consistent with:

Accepted Answer

A)  market, income and risk approach 
B)  market, performance and cost approach 
C)  security, income and risk approach 
D)  market, income and cost approach

Question 12

What of a life insurer's is determined by applying factors for risk components to specific on and off-balance sheet assets or liabilities and by adding the results?

Accepted Answer

A)  The annual Return 
B)  Business policy 
C)  Provincial act 
D)  Capital requirement

Question 13

An attitude that includes a questioning mind and a critical assessment of audit evidence is called:

Accepted Answer

A)  Operational skepticism 
B)  Audit skepticism 
C)  Professional skepticism 
D)  None of the above

Question 14

The agents submit to the insurance entity a statement of all policies issued or due during the current month, and the net amount of the statement is subsequently to be paid in accordance with the agency agreement, is an account current of:

Accepted Answer

A)  Insurance billing 
B)  Direct billing 
C)  Rendering basis 
D)  Billing basis

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

In which premium income less return premiums arising from policies issued by the entity collecting the premiums and acting as the primary insurance carrier?

Accepted Answer

A)  Indirect premium 
B)  Direct premium 
C)  Reinsurance premium 
D)  Entity premium

Question 17

agreements may contain par cap provisions that could significantly alter the economics of the transactions.

Accepted Answer

A)  Yield-maintenance 
B)  Price-cap 
C)  Fixed-coupon 
D)  Accounting

Question 18

In what, securities involve in repos are not delivered on the settlement date of the agreement and the contract may be extended upon mutual agreement of the buyer-lender and seller-borrower.

Accepted Answer

A)  Financial servicing 
B)  Price-cap 
C)  Rollover 
D)  Purchasing agreements

Question 19

Quantifies the sensitivity of the option price to changes in interest rates is known as:

Accepted Answer

A)  complexity measure 
B)  quantifiable measure 
C)  effective duration measure 
D)  change measure

Question 20

_______ 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

A)  Claim adjustment 
B)  Claim recovery 
C)  Subrogation 
D)  Salvage

Exam 1: Accredited Financial Examiner