Practice Test Geeks(CAS) Casualty Actuarial Society Practice Test
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Regulatory Framework and Compliance Flashcards

7 cards from real CAS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. What is the Risk-Based Capital (RBC) ratio threshold below which regulators may take mandatory control of a property-casualty insurer?

    Answer: Below 70% of Authorized Control Level RBC

    When an insurer's RBC ratio falls below 70% of the Authorized Control Level, the regulator is mandated to take control of the company.

  2. Under the NAIC's Uniform Certificate of Authority Application (UCAA) process, what does a 'primary state' designation mean?

    Answer: The state of domicile that leads the insurer's financial examination

    The primary state in the UCAA process is the state of domicile, which takes the lead role in coordinating financial regulation and examinations for that insurer.

  3. Which actuarial standard of practice (ASOP) most directly governs an actuary's responsibilities when signing an insurance company's Statement of Actuarial Opinion?

    Answer: ASOP No. 36 — Statements of Actuarial Opinion Regarding Property/Casualty Loss and LAE Reserves

    ASOP No. 36 provides guidance specifically for actuaries opining on property/casualty loss reserves in the Annual Statement, establishing standards for scope, procedures, and disclosures.

  4. What is the primary distinction between an 'admitted' and a 'non-admitted' (surplus lines) insurer?

    Answer: Admitted insurers are licensed and subject to rate/form regulation; non-admitted have more flexibility but less guaranty fund protection

    Admitted carriers are licensed by the state and subject to rate/form regulation plus guaranty fund coverage, while surplus lines carriers have more pricing flexibility but policyholders lack guaranty fund protection.

  5. Which of the following is a key requirement under the Nonadmitted and Reinsurance Reform Act (NRRA) of 2010 for surplus lines transactions?

    Answer: Only the home state of the insured has regulatory authority for surplus lines transactions

    The NRRA established that only the insured's home state has regulatory jurisdiction and the right to collect premium taxes on surplus lines transactions, simplifying multi-state regulation.

  6. Under state insurance regulation, what is the 'unfair discrimination' prohibition in rate making?

    Answer: Prohibiting rates that do not reflect actuarially justified differences in expected losses

    Unfair discrimination prohibits charging different rates to policyholders with the same expected loss costs; rate differences must be justified by actuarially sound loss experience.

  7. What is the purpose of the NAIC's Own Risk and Solvency Assessment (ORSA) requirement for large insurers?

    Answer: To have insurers internally assess their risk profile and capital needs relative to their risk appetite

    ORSA requires large insurers to conduct and document their own forward-looking assessment of material risks and the capital needed to remain solvent under various scenarios.