Statutory Accounting Principles & Insurance Financial Statements Flashcards
7 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Statutory Accounting Principles & Insurance Financial Statements flashcards as text
What is the Interest Maintenance Reserve (IMR) used for in life insurance statutory accounting?
Answer: To defer realized capital gains and losses on fixed-income investments and amortize them into income over the remaining life of the investment sold
The IMR captures realized capital gains and losses on fixed-income investments attributable to interest rate changes, deferring them and amortizing them into income over the remaining duration of the sold asset.
What is the Asset Valuation Reserve (AVR) in statutory accounting for life insurance companies?
Answer: A reserve to stabilize surplus against credit and equity investment risks
The AVR is a statutory reserve that stabilizes policyholder surplus by absorbing gains and losses related to credit defaults and equity price changes, buffering the balance sheet against investment volatility.
In the context of insurance regulation, what does a 'risk-focused examination' refer to?
Answer: An examination approach that allocates resources based on an insurer's risk profile and highest-risk areas
A risk-focused examination directs regulatory examination resources toward the areas of highest risk in an insurer's operations, as outlined in the NAIC Financial Condition Examiners Handbook.
What is the purpose of the 'opinion of the appointed actuary' included in the NAIC Annual Statement?
Answer: To attest that loss and premium reserves are adequate and meet applicable actuarial standards
The appointed actuary's opinion, required by NAIC model laws, certifies that the insurer's reserve amounts are adequate to meet all future obligations and calculated per applicable actuarial standards of practice.
What is a 'premium deficiency reserve' (PDR) in insurance accounting?
Answer: A reserve established when anticipated losses and expenses exceed the unearned premium reserve
A PDR is required when the sum of expected future losses and expenses for a group of contracts exceeds the unearned premium reserve, preventing understatement of liabilities.
When an insurer's Total Adjusted Capital falls below its 'Company Action Level' (CAL) RBC, what is required?
Answer: The insurer must file a comprehensive RBC plan with the commissioner outlining corrective actions
At the Company Action Level, the insurer is required to submit an RBC plan to the insurance commissioner identifying the conditions causing the deficiency and proposed corrective actions.
In statutory insurance accounting, what is the significance of an asset being 'admitted' versus 'nonadmitted'?
Answer: Only admitted assets count toward satisfying statutory reserve and surplus requirements
Only admitted assets can be counted toward meeting an insurer's statutory reserve liabilities and surplus requirements, as they are deemed sufficiently liquid and reliable to pay policyholder claims.