LOMA 291 Actual Questions with Detailed Answers

LOMA 291 Actual Questions with Detailed Answers

Question 1.
A party that has an interest in how a company con- ducts its business

Correct Answer: Stakeholders (constituents)


Question 2.
Compensation that a company may pay to owners upon a vote by thr company's board of
directors

Correct Answer: Dividend


Question 3.
Insurance that one insurance company, the direct writer, purchases from another
insurance company, the reinsurer, to transfer all or part of the risk on insurance policies
that the direct writer issued

Correct Answer: Reinsurance


Question 4.
A member of the board of directors who also holds a position within the company

Correct Answer: Inside directors


Question 5.
A member of the board of directors who does not bold a position within the company

Correct Answer: Outside directors (independent directors)


Question 6.
An independent, impartial and confidential professional who provides ethical guidance on
specific problems

Correct Answer: Ombudsman Program


Question 7.
A department or other organizational unit that produces or administers products or
services Ex. Product development, marketing, distribution & sales, underwriting & new
business, customer service, reinsurance administration, claims

Correct Answer: Line function

,Question 8.
A department or other organizational unit that provides support services to line functions
or to other support functions but does not produce or administer products Ex. Accounting
& financial reporting, audit, corporate communications, legal & compliance, finance, HR,
IT, treasury, risk management

Correct Answer: Support functions (staff function)


Question 9.
An organization w a long chain of command and a narrow span of control

Correct Answer: Vertical organization


Question 10.
An organization w a short chain of command and a wide span of control. Also called a
horizontal organization

Correct Answer: Flat Organization


Question 11.
An organizational structure which arranged a company's major divisions according to the
company's product lines Ex. Annuities & Life Insurance, Property & Casualty Insurance

Correct Answer: Organization by product


Question 12.
An organizational structure which arranged a company's major divisions according to the
geographic areas in which it operates Ex. Americas, Asia Pacific, Europe

Correct Answer: Organization by territory


Question 13.
An organizational structure which arranges a company's major divisions according to the
customer group each unit serves Ex. Group products (commercial), Individual Business
(personal)

Correct Answer: Organization by customer group


Question 14.
An organizational structure which arranges a company's major divisions according to the
distribution channels that deliver products to customers

Correct Answer: Organization by distribution channel

,Question 15.
The return an investor needs to earn in order to make the investment, given the risk of the
investment; typically found by adding the risk free rate of return to the risk premium

Correct Answer: Required return


Question 16.
The return on a risk free investment (the least risky investment opportunity available)

Correct Answer: Risk free rate


Question 17.
The component of investment return that compensates the investor for taking on the risk
associated w a specific investment; the rate of return required in addition to the risk free
rate for the investor to make the investment

Correct Answer: Risk premium


Question 18.
The possibility that an investor will fail to earn some or all of an expected return or will lose
all or part of the original investment

Correct Answer: Investment risk


Question 19.
A risk of unexpected outcomes due to fluctuations in the market values in a given financial
market

Correct Answer: Market risk (financial market risk)


Question 20.
The risk that unpredictable movements or stagnation in market interest rates will cause
assets to lose value or liabilities to gain value

Correct Answer: Interest rate risk


Question 21.
The risk that a borrower will fail to repay their debt

Correct Answer: Default risk

, Question 22.
The risk of being unable to quickly convert an asset to cash for its underlying value

Correct Answer: Liquidity risk


Question 23.
The risk that an insurer's actual experience with pricing factors such as operating costs or
mortality rates will be significantly worse than expected, causing the insurer to lose money
on its products

Correct Answer: Pricing risk


Question 24.
The risk that changes in a company's external environment will affect its operations

Correct Answer: Business risk


Question 25.
A broad category of risks resulting from external events or poor internal processes and
controls, people or systems

Correct Answer: Operational risk


Question 26.
An operational risk resulting from inefficient or failed internal processes, controls, people,
technology or systems

Correct Answer: Business process risk


Question 27.
An operational risk from catastrophic events such as earthquakes, hurricanes, political
unrest, airplane crashes, fraud, technology failures, etc

Correct Answer: Event risk


Question 28.
Management activity directed toward ensuring that an organization's mission and
objectives are accomplished effectively, efficiently and according to plan

Correct Answer: Control function