ACTUARY Professional and Practical Applications Flashcards
7 cards from real Actuary Certification practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 ACTUARY Professional and Practical Applications flashcards as text
An actuary advising a pension plan sponsor on contribution strategy uses the concept of 'funding corridor.' What does this corridor represent?
Answer: Minimum and maximum allowable contribution levels under IRS rules
IRS rules for qualified plans prescribe minimum required contributions and limits on deductible contributions, forming a regulatory funding corridor.
In predictive analytics for insurance pricing, Generalized Linear Models (GLMs) are preferred over ordinary least squares (OLS) regression primarily because:
Answer: GLMs handle non-normal response distributions and non-linear link functions
GLMs extend OLS by allowing the response variable to follow exponential family distributions (e.g., Poisson, Gamma) via a link function, better modeling insurance data.
Which principle guides an actuary when multiple equally reasonable actuarial estimates exist and the actuary must select one for a formal opinion?
Answer: Apply professional judgment to select the best estimate within the reasonable range
Actuarial standards require the actuary to exercise professional judgment in selecting a reasonable estimate, which need not be the highest or the midpoint.
An actuary models hurricane losses using a catastrophe model. The Exceedance Probability (EP) curve relates probable maximum loss to:
Answer: The probability that annual losses will exceed a given threshold
An EP curve shows, for each possible loss level, the probability that aggregate annual losses will exceed that level.
Under ERISA, a pension plan's actuary must certify the plan's funding status annually. Which metric determines whether a plan is in 'critical status'?
Answer: Funded percentage below 65% or projected insolvency within 5 years
A multiemployer plan enters critical status if its funded percentage falls below 65% or it is projected to become insolvent within five years.
Which actuarial concept describes the difference between the expected claims cost before and after considering policyholder behavioral responses to a rate change?
Answer: Elasticity adjustment
Elasticity adjustment (or demand elasticity) accounts for how policyholders' decisions to purchase, lapse, or switch coverage respond to price changes.
The SOA's Continuing Education (CE) requirement mandates that Fellows (FSAs) complete a minimum number of CE hours per year. What is the primary purpose of this requirement?
Answer: To ensure actuaries maintain and update their professional competence
CE requirements ensure that credentialed actuaries stay current with evolving standards, methodologies, and regulations throughout their careers.