CAS Online Course 2 Actual Questions With Correct Detailed Answers A+ Score

GAAP - correct answer A common set of accounting standards and procedures used in the preparation of financial statements to ensure consistency of presentation and reported results. SAP - correct answer The accounting principles and practices that are prescribed or permitted by an insurer's domiciliary state and that insurers must follow. FASB - correct answer Which organization is considered to be top of the hierachy in the US, though it is subject to veto Mark-to-Model - correct answer The valuation of an asset based on financial models instead of market price. Mark-to-Market - correct answer The value of an asset or liability based on its current market price. Deferral-Matching - correct answer An accounting approach in which the focus is to coordinate the timing of income and expense recognition so that both occur when the triggering event that is the focus of the contract occurs. Accounts Recievable - correct answer A current asset representing monies owed to a business by customers for goods or services rendered. Net Worth formula - correct answer Assets - Liabilities Balance Sheet - correct answer can be thought of as showing the sources and uses of an organization's funds. typical insurer liabilities - correct answer obligations arising from the insurance contracts. Third-party liabilities - correct answer represent amounts owed by the insurer on behalf of policyholders (e.g. CGL) first-party liabilities - correct answer represent amounts owed by the insurer to policyholders (e.g. APD) Types of Insurer assets - correct answer Premium balances, reinsurance recoverables, deferred acquisition costs Deferred acquisition costs (DAC) - correct answer The recognition of the cost of acquiring a new customer over the duration of an insurance contract. Types of Insurer liabilities - correct answer claim liabilities (reserves) and unearned premium insurance expense - correct answer This is the liability for expenses incurred but unpaid in conjunction with the insurance policy, other than the claim expenses previously discussed. Typical expenses include commission liabilities (sometimes split into regular and contingent commission liabilities) and premium tax liabilities (where applicable). Net Income formula - correct answer revenue - expenses Notes and Disclosures - correct answer allow for additional information beyond the statements including forward-looking information Asset-Liability - correct answer An accounting approach that focuses on the value of assets or liabilities that exist as of the balance sheet date. Does not use earned premium concept and affects the income statement. premium revenue - correct answer equals the written premium during the period plus the beginning unearned premium liability less the ending unearned premium liability. ultimate premium revenue - correct answer equals total written premiums to date Premium - correct answer represents the most significant source of revenue for most insurers and is a principal measure of insurer size and growth tax surcharges - correct answer creates a temporary entry in the cash asset account and in the noninsurance liability account deposit premium - correct answer The amount a policyholder pays at the beginning of a policy period, pending the determination of the actual premium owed reinstatement premium - correct answer A premium that applies to reinsurance contracts or primary policies to reinstate the original policy limit after it has been exhausted by the covered event in order to cover another possible event under the reinsurance or primary policy. earned but unbilled (EBUB) and earned but not reported (EBNR) - correct answer Two terms sometimes used to represent premium that has been earned Extended Reporting Endorsements - correct answer to be recorded as unearned premium reserves when the extension is for a definite period into the future and as loss reserves when the extension is for an indefinite period. Audit Premium - correct answer an example of premium earned before it is written The premium deficiency reserve is generally equal to - correct answer the difference between the expected losses and expenses underlying the unearned premiums and the unearned premium reserve reported on the financial statements. Pro Rata - correct answer Based on accounting rules, which earning approach may be allowed, as an exception, when the effect is not material to the financial statements. additional case reserve - correct answer This reserve is most common for claims under assumed reinsurance contracts Subrogation - correct answer The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss. an insurer's right to recover the amount of claim payment from a responsible third party. bulk reserves - correct answer reserve representing the estimated deficiency in the aggregate of case reserves for known claims are known as bulk reserves. employee-benefit accounting - correct answer accounting standards or rules may apply to self-insured liabilities related to workers compensation claims? suspense account - correct answer When a claim payment is made but the corresponding entry has not yet been made, the payment is registered to Prospective Reinsurance - correct answer Reinsurance purchased to cede future losses. loss portfolio transfer - correct answer A type of retroactive plan that applies to an entire portfolio of losses. retrocession - correct answer A reinsurance agreement whereby one reinsurer (the retrocedent) transfers all or part of the reinsurance risk it has assumed or will assume to another reinsurer (the retrocessionaire). retrocessionaire - correct answer The reinsurer that assumes all or part of the reinsurance risk accepted by another reinsurer. US GAAP treatment of ceded losses on a balance sheet - correct answer Ceded loss reserves are treated as an asset. deposit accounting rules - correct answer 1) No transfer of risk 2) timing risk exists, but amount of risk is negligible 3) reinsurance is retroactive deposit accounting requires - correct answer 1) The amount(s) received for a contract is recorded as a deposit liability, with no revenue or expense effect (and therefore, no effect on income). 2) The deposit liability is increased by additional receipts and usually by investment income credits of some kind. It is decreased by payments. 3) The deposit generally represents a present value of future payment obligations. Bank deposit approach - correct answer deposit accounting approach where ending balance only relies on initial balance, credited rate, and any deposits or withdrawals. Prospective approach - correct answer "defining characteristic of this deposit banking approach is that the current value of the deposit is set equal to the present value of future payments, deposit value will change with the amortization of interest and with a change in projected future losses" Retrospective approach - correct answer defining characteristic of this approach is that the deposit is a function of the initial deposit, past payments, and the current estimate of all future payments. This approach focuses on all the flows since inception, past and future. The deposit value and discount rate are subject to change whenever the projected cash flows since inception are changed. Contract of Indemnity - correct answer a contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss. The insured should be "made whole" but should not make a profit. upmost good faith - correct answer Parties act with complete honesty and disclose all relevant facts. Insureds must provide information without concealment or misrepresentation, and insurers must fulfill promises as outlined in the contract. Contract of Adhesion - correct answer any contract in which one party must eitehr accept the agreement as written by the other party or reject it