AFSB 152 EXAM LATEST ACTUAL EXAM 1000

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AFSB 152 EXAM LATEST ACTUAL EXAM 1000

QUESTIONS AND CORRECT DETAILED

ANSWERS ALREADY GRADED A+

An insurer can improve its balance sheet values by increasing the value of its assets. Which one of the following is a way of accomplishing this?

Select one:

• Stepped-up loss reserves
• Sale and leaseback
• Premium growth
• Finite risk reinsurance - ANSWER-B

FAM Insurance issued $100 million in catastrophe bonds through a special purpose vehicle (SPV). Coverage attaches when losses from a Category 3 or greater hurricane exceed $50 million. The bond pays 8 percent interest and has a 3-year term. Which one of the following correctly states how the catastrophe bond will respond if FAM Insurance experiences $35 million in losses from a Category 4 hurricane during the bond term?

Select one:

• The SPV will provide 8 percent in interest for 2 out of the 3 years, and return the principal at

the end of the 3-year period.

• The SPV will provide 8 percent in interest each year and return 70 percent of the principal. 1 / 4

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• The SPV will provide 8 percent in interest each year and return the principal at the end of the

3-year term.

• The SPV will provide 8 percent in interest each year and automatically roll over the principal

for another 3 years. - ANSWER-C

Which one of the following is the main method mutual insurers use to raise surplus or equity?

Select one:

• Surplus notes
• Bonds
• Equity capital
• Reinsurance ceding commissions - ANSWER-A

The NAIC Own Risk and Solvency Assessment (ORSA) does all of the following, EXCEPT:

Select one:

• Imposes rigid structure
• Challenges insurers to prospectively determine capital adequacy
• Promotes enterprise risk management (ERM) principles
• Advocates financial soundness - ANSWER-A
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3 Which one of the following describes what effect, if any, a reduction in an insurer's loss reserves will have on net income and policyholder's surplus in the year that any adjustment is made?

Select one:

• It will increase both net income and policyholder's surplus.
• It will lower net income and increase policyholder's surplus.
• It will have no effect on either net income or policyholder's surplus.
• It will increase net income and lower policyholder's surplus. - ANSWER-A

Risky Insurance Company has a risk-based capital (RBC) level of 200 percent of the authorized control level. At this level, the regulator

Select one:

• Will perform an examination of Risky Insurance Company.
• May place Risky Insurance Company under regulatory control.
• Is required to place Risky Insurance Company under regulatory control.
• Will require Risky Insurance Company to file a comprehensive plan - ANSWER-D

The risk that customers will fail to make promised payments as they come due is

Select one:

• Asset risk. 3 / 4

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• Credit risk.
• Underwriting risk.
• Off-balance sheet risk. - ANSWER-B

Surety analyst Bill Haywood is using the 10-step process to analyze Johnson Construction Company for trending and forecasting using its financial statements and other relevant sources of information. Which one of the following will be one of Bill's last steps to be done?

Select one:

• Looking at status reports for open jobs as of the analyzed dates
• Assessing owner Jim Johnson as to his appropriate business practices and standards
• Assessing the cash or capital position of the company
• Making financial comparisons using the company's financial statements - ANSWER-B

Jason is a branch-office underwriter. Jason is responsible for

Select one:

• Analyzing and interpreting contractors' financial underwriting information but refering any

nonfinacial information to the home office for a final underwriting decision.

• Making underwriting decisions for handling contractors' bonding needs on projects larger

than those the contractor has completed in the past.

• Appealing home-office underwriting decisions to decline bond requests when it is clear that

the best decision has been made.

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