Risk Assessment and Management 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.
Read the first 7 Risk Assessment and Management flashcards as text
Under the ISO risk management standard (ISO 31000), 'risk treatment' includes all of the following EXCEPT:
Answer: Ignoring the risk without documentation
ISO 31000 identifies avoidance, sharing, reduction, and retention as valid risk treatments; undocumented ignorance is not a recognized treatment option.
A company's 'risk register' is best described as:
Answer: A documented inventory of identified risks with their assessments, owners, and treatment plans
A risk register is a living ERM document that catalogues each identified risk, its likelihood, impact, owner, and the status of mitigation actions.
Which of the following scenarios illustrates 'concentration risk' in a property insurer's portfolio?
Answer: Having 60% of total insured value in a single coastal metropolitan area
Concentration risk exists when a large proportion of exposure is geographically or otherwise clustered, making a single event capable of causing outsized losses.
The Bühlmann credibility formula assigns weight 'Z' to observed experience, where Z increases as:
Answer: The variance of the hypothetical means increases relative to the expected process variance
Bühlmann credibility Z = n / (n + k), where k = EVPV/VHM; higher variance of hypothetical means (VHM) relative to process variance (EVPV) means more variation between risks exists, so observed data earns more weight.
Which of the following operational risks would be classified under the Basel II / insurance ERM 'execution, delivery, and process management' category?
Answer: A data entry error causing a policy to be mispriced and issued
Mispricing due to data entry errors in policy issuance falls under execution and process management failures, which involve internal process breakdowns.
When assessing counterparty credit risk in a reinsurance arrangement, which factor is MOST directly relevant?
Answer: The reinsurer's financial strength rating and claims-paying ability
A reinsurer's financial strength rating directly reflects its ability to pay claims when due; this is the primary measure of counterparty credit risk.
In dynamic financial analysis (DFA) for insurance companies, stochastic simulation is used primarily to:
Answer: Assess the range of possible future financial outcomes under many economic and underwriting scenarios
DFA uses stochastic simulation to model thousands of future scenarios—varying interest rates, underwriting results, and catastrophes—to understand the distribution of financial outcomes.