LOMA 291 UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS
VERIFIED 2027 EDITION
1. A party that has an interest in how a company conducts its business
Stakeholders (constituents)
2. Compensation that a company may pay to owners upon a vote by thr company's board of directors
Dividend
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
Reinsurance
4. A member of the board of directors who also holds a position within the company
Inside directors
5. A member of the board of directors who does not bold a position within the company
Outside directors (independent directors)
6. An independent, impartial and confidential professional who provides ethical guidance on specific
problems
Ombudsman Program
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
Line function
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
Support functions (staff function)
9. An organization w a long chain of command and a narrow span of control
Vertical organization
10. An organization w a short chain of command and a wide span of control. Also called a horizontal
organization
Flat Organization
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
Organization by product
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
Organization by territory
1
,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)
Organization by customer group
14. An organizational structure which arranges a company's major divisions according to the
distribution channels that deliver products to customers
Organization by distribution channel
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
Required return
16. The return on a risk free investment (the least risky investment opportunity available)
Risk free rate
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
Risk premium
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
Investment risk
19. A risk of unexpected outcomes due to fluctuations in the market values in a given financial
market
Market risk (financial market risk)
20. The risk that unpredictable movements or stagnation in market interest rates will cause assets to
lose value or liabilities to gain value
Interest rate risk
21. The risk that a borrower will fail to repay their debt
Default risk
22. The risk of being unable to quickly convert an asset to cash for its underlying value
Liquidity risk
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
Pricing risk
24. The risk that changes in a company's external environment will affect its operations
Business risk
25. A broad category of risks resulting from external events or poor internal processes and controls,
people or systems
Operational risk
26. An operational risk resulting from inefficient or failed internal processes, controls, people,
technology or systems
Business process risk
2
, 27. An operational risk from catastrophic events such as earthquakes, hurricanes, political unrest,
airplane crashes, fraud, technology failures, etc
Event risk
28. Management activity directed toward ensuring that an organization's mission and objectives are
accomplished effectively, efficiently and according to plan
Control function
29. A control established at the beginning of a process that describes how a company intends to
implement the process and avoid pitfalls
Steering controls
30. A control that takes the form of checks and balances built into a process and that is applied during
the process
Concurrent controls
31. A control that takes the form of checks and corrections that are applied to a process at the end of
the process cycle
Feedback controls
32. A systematic application of management policies, procedures, and practices to identify, quantify,
model, offset and limit the impact of unexpected outcomes, consistent w organizational objectives
Risk management
33. A risk management strategy that involves balancing one risk w a complementary risk that will
ideally offset the original risk
Hedging
34. Risk management that takes an organization wide view of risk and manages risk in a coordinated
approach across the organization
Enterprise Risk Management (ERM)
35. A risk management model structured in three parts: operational management, internal
monitoring and oversight functions, and internal audits
Three lines of defense
36. A form of distribution that enables personalized sales to customers through multiple integrated
communication channels
Omnichannel distribution
37. The method an insurance company uses to connect its products or services w the potential
customers who might want or need them
Distribution system
38. A system in which the insurance company relies on external individuals and organizations to
connect w the customer
Intermediary distribution system
39. Financial professionals directed by an insurer who distribute the insurer's products
Direct sales force
3
VERIFIED 2027 EDITION
1. A party that has an interest in how a company conducts its business
Stakeholders (constituents)
2. Compensation that a company may pay to owners upon a vote by thr company's board of directors
Dividend
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
Reinsurance
4. A member of the board of directors who also holds a position within the company
Inside directors
5. A member of the board of directors who does not bold a position within the company
Outside directors (independent directors)
6. An independent, impartial and confidential professional who provides ethical guidance on specific
problems
Ombudsman Program
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
Line function
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
Support functions (staff function)
9. An organization w a long chain of command and a narrow span of control
Vertical organization
10. An organization w a short chain of command and a wide span of control. Also called a horizontal
organization
Flat Organization
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
Organization by product
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
Organization by territory
1
,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)
Organization by customer group
14. An organizational structure which arranges a company's major divisions according to the
distribution channels that deliver products to customers
Organization by distribution channel
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
Required return
16. The return on a risk free investment (the least risky investment opportunity available)
Risk free rate
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
Risk premium
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
Investment risk
19. A risk of unexpected outcomes due to fluctuations in the market values in a given financial
market
Market risk (financial market risk)
20. The risk that unpredictable movements or stagnation in market interest rates will cause assets to
lose value or liabilities to gain value
Interest rate risk
21. The risk that a borrower will fail to repay their debt
Default risk
22. The risk of being unable to quickly convert an asset to cash for its underlying value
Liquidity risk
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
Pricing risk
24. The risk that changes in a company's external environment will affect its operations
Business risk
25. A broad category of risks resulting from external events or poor internal processes and controls,
people or systems
Operational risk
26. An operational risk resulting from inefficient or failed internal processes, controls, people,
technology or systems
Business process risk
2
, 27. An operational risk from catastrophic events such as earthquakes, hurricanes, political unrest,
airplane crashes, fraud, technology failures, etc
Event risk
28. Management activity directed toward ensuring that an organization's mission and objectives are
accomplished effectively, efficiently and according to plan
Control function
29. A control established at the beginning of a process that describes how a company intends to
implement the process and avoid pitfalls
Steering controls
30. A control that takes the form of checks and balances built into a process and that is applied during
the process
Concurrent controls
31. A control that takes the form of checks and corrections that are applied to a process at the end of
the process cycle
Feedback controls
32. A systematic application of management policies, procedures, and practices to identify, quantify,
model, offset and limit the impact of unexpected outcomes, consistent w organizational objectives
Risk management
33. A risk management strategy that involves balancing one risk w a complementary risk that will
ideally offset the original risk
Hedging
34. Risk management that takes an organization wide view of risk and manages risk in a coordinated
approach across the organization
Enterprise Risk Management (ERM)
35. A risk management model structured in three parts: operational management, internal
monitoring and oversight functions, and internal audits
Three lines of defense
36. A form of distribution that enables personalized sales to customers through multiple integrated
communication channels
Omnichannel distribution
37. The method an insurance company uses to connect its products or services w the potential
customers who might want or need them
Distribution system
38. A system in which the insurance company relies on external individuals and organizations to
connect w the customer
Intermediary distribution system
39. Financial professionals directed by an insurer who distribute the insurer's products
Direct sales force
3
