LOMA 361 EXAMS SCRIPT 2025/2026 QUESTIONS AND
SOLUTIONS RANKED A+
✔✔business transaction - ✔✔a transaction to which a company must assign an
objective monetary value, whether the impact on the company is large or small, actual
or expected
✔✔C-1 risk (asset risk) - ✔✔the risk that an insurer will lose asset value (other than loss
in value caused by movement in interest rates) on it's investments such as stocks,
bonds, mortgages and real estate
✔✔C-2 Risk (Pricing Risk) - ✔✔the risk that an insurer's experience with mortality or
expenses will differ significantly from expectations, causing the insurer to lose money on
it's products
✔✔C-3 risk (interest-rate risk) - ✔✔the risk that market interest rates might shift,
causing an insurer's assets to lose value and/or it's liabilities gain value
✔✔C-4 (General management risk) - ✔✔the risk of losses resulting from an insurer's
ineffective general business practices, the need to pay a special assessment to cover
another insurer's unsound business practices, unfavorable regulatory changes or
unfavorable changes in tax laws
✔✔call option - ✔✔an option that gives an owner the right, but not the obligation, to buy
an asset at a specified price within a limited time
✔✔Capital - ✔✔the amount of money invested in a company by it's owners, usually
through the purchase of company stock
✔✔Capital Adequacy - ✔✔the minimum amount of capital an insurer must have to meet
a specified standard for capital
✔✔capital and surplus ratios - ✔✔financial ratios that express the relationship between
an insurer's capital and surplus and its liabilities.
✔✔capital budget - ✔✔a budget that shows a company's plans for the financial
management of it's long-term, high-cost investment proposals, such as new investments
in equipment or real estate, major repairs to or remodeling of existing investments,
acquisitions of other companies or lines of business, mandated safety or environmental
improvements, expense reduction projects, purchases of new computer systems and
equipment and revenue expansion projects
✔✔capital budgeting - ✔✔the process companies undertake to analyze decisions about
investing in long-term projects or assets
,✔✔capital gain - ✔✔the amount by which the selling price of an asset exceeds its book
value
✔✔capital loss - ✔✔the amount by which the book value of an asset exceeds its selling
price
✔✔capitalize - ✔✔in the context of accounting for specified costs, to record the costs as
an asset
✔✔cash - ✔✔the amount of currency on hand or on deposit at an insurer's bank
✔✔cash accounting - ✔✔the management and maintenance of records for, and the
reporting of, all cash transactions, specifically money deposited or withdrawn from an
insurer's accounts at bank or financial institution
✔✔cash budget - ✔✔a type of budget that projects a company's beginning cash
balance, cash inflows, cash outflows, and ending cash balance for a specified
accounting period, typically a quarter
✔✔cash disbursement - ✔✔the payment of cash by a company
✔✔cash disbursements budget - ✔✔a schedule of estimates of the timing and amount
of cash disbursements during an accounting period
✔✔(cash) dividend on stock - ✔✔a cash payment that company distributes periodically
to the owner's of its preferred stock and common stock; a share of the company's
earnings that the company pays to its stockholders
✔✔cash equivelents - ✔✔short-term assets that are not cash, but can be converted to
cash within 90 days with little or no risk of losing value
✔✔cash flow - ✔✔any movement of cash into or out of an organization
✔✔Cash Flow Statement - ✔✔a financial statement that shows a company's cash
receipts, cash disbursements, and the net change in cash during a specified accounting
period
✔✔cash inflow - ✔✔a movement of cash into an organization
✔✔cash receipt - ✔✔a check, money order, EFT or other cash transaction that is
remitted to a company as a form of payment for goods or services rendered
✔✔cash receipts budget - ✔✔a schedule of cash receipts expected during an
accounting period, using data from both the sales and investments forcasts
,✔✔cash surrender value - ✔✔the amount of money a policy owner will receive on a
specified date if the policy owner terminates the coverage and surrenders the policy to
the insure; also known as net cash value
✔✔Cash Basis Accounting - ✔✔an accounting system in which a company recognizes
revenues or expenses only when it receives or disburses cash
✔✔cash flow testing (CFT) - ✔✔a type of scenario analysis, commonly used for valuing
an insurer's liabilities whose cash flows are sensitive to interest rate fluctuations, in
which the insurer projects cash flows associated with its existing business and
compares the timing and amounts of the cash flows for assets and liabilities after the
valuation date, using scenarios of assumed future economic and operating conditions
✔✔chargeback method - ✔✔a service department cost allocation method in which a
department allocates its indirect costs to departments based on usage; can be though
of as internal billing
✔✔chart of accounts - ✔✔a numbered or alphabetical list of all of the company's
account names
✔✔claim reserves - ✔✔a type of accident and health reserves that represent the
expected future amounts to be paid on claims that have already occurred and have
been reported to the insurer before the financial statement date, but have not yet been
paid in full as of that date
✔✔closing entry - ✔✔an accounting entry that a company makes at the end of each
accounting period to start the next accounting period with a zero balance in its
temporary accounts
✔✔codification - ✔✔a process undertaken to help standardize financial reporting
requirements, and ultimately, to develop one set of comprehensive statutory guidelines
among the 50 states
✔✔collateral - ✔✔something of value, usual a portion of the bond insurer's assets,
which the bondholder will receive if the bond insurer fails to make the contracted
principal and interest payments on the bond
✔✔Collaterized
Mortgage
Obligations (CMOs) - ✔✔mortgage-back bonds, which are secured by a pool of
residential mortgage loans
✔✔collected income - ✔✔the amount of income, including certain adjustments, received
in cash during an accounting period
, ✔✔collusion - ✔✔a secret agreement entered into by two or more persons to perpetrate
an illegal act, usually through the circumvention of internal controls such as segregation
of duties or authorization levels
✔✔commission - ✔✔monetary compensation that is paid to a producer and is usually
expressed as a percentage of the gross premiums paid by customers
✔✔common stock - ✔✔a unit of ownership that usually entitles the owner to (1) vote on
the selection of directors and on other important company matters and (2) receive
dividend on the stock
✔✔common-size financial statement - ✔✔a financial statement that includes the
percentages obtained from vertical analysis
✔✔Comparability - ✔✔the quality of accounting information that requires that a
company's financial statements be presented in such a way that interest users can
identify similarities and differences in financial information across accounting periods
and among different companies
✔✔comparitive financial statements - ✔✔financial statements that present date for for
two or more accounting periods side by side
✔✔compliance audit - ✔✔a type of audit that verifies an insurer's financial statements
adhere to the laws, regulations, policies and procedures prescribed by internal or
external regulatory authorities and the market conduct of an insurer's producers
✔✔compound accounting entry - ✔✔a record of a business transaction that effects
more than two accounts
✔✔conservatism - ✔✔the quality of accounting information that calls for a prudent
reaction for dealing with uncertainty in accounting records and reports; in practice, it
usually understates the values of a company's assets and revenues and overstates the
values of a company's liabilities and expenses
✔✔Consistency - ✔✔the quality of accounting information that requires a company to
use the same accounting policies and procedures in its financial statements from one
accounting period to the next, unless there is a sound reason for changing a specified
policy or procedure
✔✔contingency risks - ✔✔risks that determine and insurer's minimum level of liquidity
and capital; an insurer's total risk is evaluated relative to its invested assets and the
products that it underwrites
SOLUTIONS RANKED A+
✔✔business transaction - ✔✔a transaction to which a company must assign an
objective monetary value, whether the impact on the company is large or small, actual
or expected
✔✔C-1 risk (asset risk) - ✔✔the risk that an insurer will lose asset value (other than loss
in value caused by movement in interest rates) on it's investments such as stocks,
bonds, mortgages and real estate
✔✔C-2 Risk (Pricing Risk) - ✔✔the risk that an insurer's experience with mortality or
expenses will differ significantly from expectations, causing the insurer to lose money on
it's products
✔✔C-3 risk (interest-rate risk) - ✔✔the risk that market interest rates might shift,
causing an insurer's assets to lose value and/or it's liabilities gain value
✔✔C-4 (General management risk) - ✔✔the risk of losses resulting from an insurer's
ineffective general business practices, the need to pay a special assessment to cover
another insurer's unsound business practices, unfavorable regulatory changes or
unfavorable changes in tax laws
✔✔call option - ✔✔an option that gives an owner the right, but not the obligation, to buy
an asset at a specified price within a limited time
✔✔Capital - ✔✔the amount of money invested in a company by it's owners, usually
through the purchase of company stock
✔✔Capital Adequacy - ✔✔the minimum amount of capital an insurer must have to meet
a specified standard for capital
✔✔capital and surplus ratios - ✔✔financial ratios that express the relationship between
an insurer's capital and surplus and its liabilities.
✔✔capital budget - ✔✔a budget that shows a company's plans for the financial
management of it's long-term, high-cost investment proposals, such as new investments
in equipment or real estate, major repairs to or remodeling of existing investments,
acquisitions of other companies or lines of business, mandated safety or environmental
improvements, expense reduction projects, purchases of new computer systems and
equipment and revenue expansion projects
✔✔capital budgeting - ✔✔the process companies undertake to analyze decisions about
investing in long-term projects or assets
,✔✔capital gain - ✔✔the amount by which the selling price of an asset exceeds its book
value
✔✔capital loss - ✔✔the amount by which the book value of an asset exceeds its selling
price
✔✔capitalize - ✔✔in the context of accounting for specified costs, to record the costs as
an asset
✔✔cash - ✔✔the amount of currency on hand or on deposit at an insurer's bank
✔✔cash accounting - ✔✔the management and maintenance of records for, and the
reporting of, all cash transactions, specifically money deposited or withdrawn from an
insurer's accounts at bank or financial institution
✔✔cash budget - ✔✔a type of budget that projects a company's beginning cash
balance, cash inflows, cash outflows, and ending cash balance for a specified
accounting period, typically a quarter
✔✔cash disbursement - ✔✔the payment of cash by a company
✔✔cash disbursements budget - ✔✔a schedule of estimates of the timing and amount
of cash disbursements during an accounting period
✔✔(cash) dividend on stock - ✔✔a cash payment that company distributes periodically
to the owner's of its preferred stock and common stock; a share of the company's
earnings that the company pays to its stockholders
✔✔cash equivelents - ✔✔short-term assets that are not cash, but can be converted to
cash within 90 days with little or no risk of losing value
✔✔cash flow - ✔✔any movement of cash into or out of an organization
✔✔Cash Flow Statement - ✔✔a financial statement that shows a company's cash
receipts, cash disbursements, and the net change in cash during a specified accounting
period
✔✔cash inflow - ✔✔a movement of cash into an organization
✔✔cash receipt - ✔✔a check, money order, EFT or other cash transaction that is
remitted to a company as a form of payment for goods or services rendered
✔✔cash receipts budget - ✔✔a schedule of cash receipts expected during an
accounting period, using data from both the sales and investments forcasts
,✔✔cash surrender value - ✔✔the amount of money a policy owner will receive on a
specified date if the policy owner terminates the coverage and surrenders the policy to
the insure; also known as net cash value
✔✔Cash Basis Accounting - ✔✔an accounting system in which a company recognizes
revenues or expenses only when it receives or disburses cash
✔✔cash flow testing (CFT) - ✔✔a type of scenario analysis, commonly used for valuing
an insurer's liabilities whose cash flows are sensitive to interest rate fluctuations, in
which the insurer projects cash flows associated with its existing business and
compares the timing and amounts of the cash flows for assets and liabilities after the
valuation date, using scenarios of assumed future economic and operating conditions
✔✔chargeback method - ✔✔a service department cost allocation method in which a
department allocates its indirect costs to departments based on usage; can be though
of as internal billing
✔✔chart of accounts - ✔✔a numbered or alphabetical list of all of the company's
account names
✔✔claim reserves - ✔✔a type of accident and health reserves that represent the
expected future amounts to be paid on claims that have already occurred and have
been reported to the insurer before the financial statement date, but have not yet been
paid in full as of that date
✔✔closing entry - ✔✔an accounting entry that a company makes at the end of each
accounting period to start the next accounting period with a zero balance in its
temporary accounts
✔✔codification - ✔✔a process undertaken to help standardize financial reporting
requirements, and ultimately, to develop one set of comprehensive statutory guidelines
among the 50 states
✔✔collateral - ✔✔something of value, usual a portion of the bond insurer's assets,
which the bondholder will receive if the bond insurer fails to make the contracted
principal and interest payments on the bond
✔✔Collaterized
Mortgage
Obligations (CMOs) - ✔✔mortgage-back bonds, which are secured by a pool of
residential mortgage loans
✔✔collected income - ✔✔the amount of income, including certain adjustments, received
in cash during an accounting period
, ✔✔collusion - ✔✔a secret agreement entered into by two or more persons to perpetrate
an illegal act, usually through the circumvention of internal controls such as segregation
of duties or authorization levels
✔✔commission - ✔✔monetary compensation that is paid to a producer and is usually
expressed as a percentage of the gross premiums paid by customers
✔✔common stock - ✔✔a unit of ownership that usually entitles the owner to (1) vote on
the selection of directors and on other important company matters and (2) receive
dividend on the stock
✔✔common-size financial statement - ✔✔a financial statement that includes the
percentages obtained from vertical analysis
✔✔Comparability - ✔✔the quality of accounting information that requires that a
company's financial statements be presented in such a way that interest users can
identify similarities and differences in financial information across accounting periods
and among different companies
✔✔comparitive financial statements - ✔✔financial statements that present date for for
two or more accounting periods side by side
✔✔compliance audit - ✔✔a type of audit that verifies an insurer's financial statements
adhere to the laws, regulations, policies and procedures prescribed by internal or
external regulatory authorities and the market conduct of an insurer's producers
✔✔compound accounting entry - ✔✔a record of a business transaction that effects
more than two accounts
✔✔conservatism - ✔✔the quality of accounting information that calls for a prudent
reaction for dealing with uncertainty in accounting records and reports; in practice, it
usually understates the values of a company's assets and revenues and overstates the
values of a company's liabilities and expenses
✔✔Consistency - ✔✔the quality of accounting information that requires a company to
use the same accounting policies and procedures in its financial statements from one
accounting period to the next, unless there is a sound reason for changing a specified
policy or procedure
✔✔contingency risks - ✔✔risks that determine and insurer's minimum level of liquidity
and capital; an insurer's total risk is evaluated relative to its invested assets and the
products that it underwrites
