Regulation 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 Regulation flashcards as text
Which provision in state insurance laws requires insurers to notify policyholders before cancelling or non-renewing a policy, giving policyholders time to obtain alternative coverage?
Answer: Advance notice of cancellation or non-renewal requirements
State laws require insurers to provide advance written notice (typically 30-60 days) before cancelling or non-renewing policies, protecting consumers from abrupt loss of coverage.
Under the Employee Retirement Income Security Act (ERISA), what is the maximum period over which an employer may spread pension plan termination liability under PBGC insurance?
Answer: Liability is capped at 30% of the employer's net worth
ERISA limits an employer's liability to the PBGC upon plan termination to 30% of the employer's net worth, providing a cap on the financial exposure.
When the NAIC adopts a model law, what is its legal effect in a given state?
Answer: It has no legal effect until each state legislature adopts it into state law
NAIC model laws are template legislation with no direct legal force; they only become law when individual state legislatures adopt them, and states may modify them in the process.
An actuary performing a rate filing review for a homeowners insurer in a 'prior approval' state must understand that rates take effect:
Answer: Only after the state insurance department approves them
In prior approval states, insurers must receive explicit regulatory approval before implementing new rates, unlike file-and-use or use-and-file states.
The concept of 'statutory accounting principles' (SAP) differs from GAAP primarily because SAP is designed to:
Answer: Emphasize solvency and a conservative balance sheet for policyholder protection
SAP is designed with a solvency focus, using conservative asset valuation and recognizing liabilities early to ensure insurers can pay claims even in stressed scenarios.
Which actuarial standard of practice provides guidance on selecting and documenting assumptions used in actuarial analyses?
Answer: ASOP No. 25 and ASOP No. 27 for economic assumptions
ASOP No. 25 addresses credibility procedures, while ASOP No. 27 specifically addresses the selection of economic assumptions for measuring pension obligations.
In the context of insurance guaranty funds, which of the following is the most accurate statement?
Answer: Guaranty funds are post-assessment mechanisms funded by assessments on solvent insurers after an insolvency
State guaranty funds are post-assessment mechanisms — solvent insurers are assessed after an insolvency occurs to pay covered claims, up to statutory limits.