Loma 371 Updated Actual Questions And Correct Answers Comprehensive Study Guide

LOMA 371 UPDATED ACTUAL QUESTIONS
AND CORRECT ANSWERS
COMPREHENSIVE STUDY GUIDE

●● Required Rate of Return
Answer: = Risk-free rate of return + Risk premium*


(* this serves as the incentive for an investor to pursue a specific
investment opportunity)


●● Minimum Required Assets
Answer: = Minimum Required Reserves + Minimum Required Capital


●● Credit Risks
Answer: default risk
counterparty risk


●● Market Risks
Answer: equity risk
interest-rate risk
reinvestment rate risk
liquidity risk

,currency risk


●● Underwriting Risks
Answer: pricing risk
policyholder behavior risk


●● Operational Risks
Answer: distribution risk
human resources risk
technology risk
business process risk
business partner risk
event risk


●● Other Risks
Answer: strategy risk
regulatory risk
competition risk
reputational risk


●● Components of ERM
Answer: - A risk control process. (identify, evaluate, monitor, limit)

, - Extreme event management. (reinsurrance)


- A risk accountability framework. (risk committee or CRO)


- A risk management culture. (risk appetite = qualitative and risk
Tolerance = quanTitative)


- Strategic risk management.


●● Investment expenses
Answer: - costs of analyzing investment opportunities
- purchasing assets
- selling assets
- servicing assets


●● General and Administrative expenses
Answer: Expenses for contractual benefits


Operating expenses
- development expenses
- acquisition expenses