AIAF 114 (SECTION 2) EXAM
QUESTIONS WITH COMPLETE
SOLUTIONS
Loss Reserve - ANSWER-An estimate of the amount of money the insurer expects to
pay in the future for losses that have already occurred and been reported, but are not
yet settled.
Loss adjustment expense reserves - ANSWER-Estimates of the future expense that an
insurer expects to incur to investigate, defend, and settle claims for losses that have
already occurred.
Surplus note - ANSWER-A type of unsecured debt instrument, issued only by insurers,
that has characteristics of both conventional equity and debt securities and is classified
as policyholders' surplus rather than as a liability on the insurer's statutory balance
sheet.
Authorized reinsurer - ANSWER-A reinsurer that is authorized to do business in the
primary insurer's state of domicile
Certified insurer - ANSWER-An unauthorized reinsurer that meets certain qualifications
and is approved by the state insurance regulator of the vending company's state of
domicile
Policyholders' surplus - ANSWER-Under statutory accounting principles (SAP) an
insurer's total admitted assets minus its total liabilities
Non-admitted assets - ANSWER-Types of property, such as office furniture and
equipment, that regulators do not allow insurers to show as assets on financial
statements because these assets cannot readily be converted to cash at or near their
market value
Admitted Assets - ANSWER-Assets meeting minimum standards of liquidity that an
insurer is allowed to report on its balance sheet in accordance with statutory accounting
principles
Unauthorized reinsurer - ANSWER-A reinsurer that is not licensed or otherwise
authorized to do business in the primary insurer's state of domicile
Persistency - ANSWER-A measure of retained policies or accounts over a long period
of time
QUESTIONS WITH COMPLETE
SOLUTIONS
Loss Reserve - ANSWER-An estimate of the amount of money the insurer expects to
pay in the future for losses that have already occurred and been reported, but are not
yet settled.
Loss adjustment expense reserves - ANSWER-Estimates of the future expense that an
insurer expects to incur to investigate, defend, and settle claims for losses that have
already occurred.
Surplus note - ANSWER-A type of unsecured debt instrument, issued only by insurers,
that has characteristics of both conventional equity and debt securities and is classified
as policyholders' surplus rather than as a liability on the insurer's statutory balance
sheet.
Authorized reinsurer - ANSWER-A reinsurer that is authorized to do business in the
primary insurer's state of domicile
Certified insurer - ANSWER-An unauthorized reinsurer that meets certain qualifications
and is approved by the state insurance regulator of the vending company's state of
domicile
Policyholders' surplus - ANSWER-Under statutory accounting principles (SAP) an
insurer's total admitted assets minus its total liabilities
Non-admitted assets - ANSWER-Types of property, such as office furniture and
equipment, that regulators do not allow insurers to show as assets on financial
statements because these assets cannot readily be converted to cash at or near their
market value
Admitted Assets - ANSWER-Assets meeting minimum standards of liquidity that an
insurer is allowed to report on its balance sheet in accordance with statutory accounting
principles
Unauthorized reinsurer - ANSWER-A reinsurer that is not licensed or otherwise
authorized to do business in the primary insurer's state of domicile
Persistency - ANSWER-A measure of retained policies or accounts over a long period
of time
