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THECHARTEREDINSURANCEINSTITUTE
E92
ExaminationelementofM92insurance
businessandfinance
Basedonthe2015/2016syllabus
examineduntil30April2016
ExaminationGuide
E92ExaminationelementofM92insurancebusinessandfinance
Basedonthe2015/2016syllabusexamineduntil30April2016
Contents
IntroductiontoExaminationGuide
3
E92Syllabus
7
SpecimenExamination
11
Specimen Examination Answers and Learning Outcomes
25
Covered
PublishedinMarch2015by:
TheCharteredInsuranceInstitute
4248HighRoad,SouthWoodford,LondonE182JP
Telephone: 02089898464
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Email:
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TheCharteredInsuranceInstitute2015
E92ExaminationGuide2015/2016
ExaminationGuide
E92ExaminationelementofM92insurancebusinessandfinance
Basedonthe2015/2016syllabusexamineduntil30April2016
Introduction
ThisexaminationguidehasbeenproducedbytheExaminationsDepartmentattheCharteredInsurance
Institute (CII) to assist students in their preparation for the E92 examination. It contains a specimen
examinationwithanswerkey.
Ideally, students should have completed the majority of their E92 studies before attempting the
specimen examination. Students should allow themselves 90 minutes to complete the examination.
Theyshouldthenreviewtheirperformancetoidentifyareasofweaknessonwhichtoconcentratethe
remainder of their study time. The examination must be successfully passed within 18 months of
enrolmentonM92.
AlthoughthespecimenexaminationinthisguideistypicalofanE92examination,itshouldbenoted
thatitisnotpossibletotesteverysingleaspectofthesyllabusinanyoneparticularexamination.To
prepareproperlyfortheexamination,candidatesshouldmakefulluseofthetuitionoptionsavailable
andreadaswidelyaspossibletoensurethatthewholesyllabushasbeencovered.Theyshouldalso
endeavour to keep as uptodate as possible with developments in the industry by reading the
periodicalslistedintheM92readinglist,whichislocatedonthesyllabusinthisexaminationguideand
ontheCIIwebsiteatwww.cii.co.uk.
BackgroundInformation
CII examination questions undergo a rigorous writing and editing process before reaching an
examination. The questions are written to strict guidelines by practitioners with relevant technical
knowledge and experience. Questions are very carefully worded to ensure that all the information
requiredtoanswerthequestionisprovidedinaclearandconcisemanner.Theyaretheneditedbyan
independent panel of experienced practitioners who have been specifically trained to ensure that
questions are technically correct, clear and unambiguous. As a final check, each examination is
scrutinisedbytheSeniorExaminerandaCIIassessmentexpert.
Occasionallyaquestionwillrequireamendmentaftertheexaminationguideisfirstpublished.Insuch
anevent,therevisedquestionwillbepublishedontheCIIwebsite:
1)Visitwww.cii.co.uk/qualifications
2)Selecttheappropriatequalification
3)Selectyourunitontherighthandsideofthepage
Candidatesshouldalsoreferhereforthelatestinformationonchangestolawandpracticeandwhen
theywillbeexamined.
E92ExaminationGuide2015/2016
ExaminationGuide
Syllabus
TheM92syllabusispublishedontheCIIwebsiteatwww.cii.co.uk.Candidatesshouldnotethatthe
examinationisbasedonthesyllabus,ratherthanonanyparticulartuitionmaterial.Ofcourse,theCII
tuition material will provide the vast majority of the information required to perform well in the
examination, but the CII recommends that students consult other reference materials to supplement
theirstudies.
SkillSpecification
The examination syllabus categorises M92 learning outcomes into attainment levels. Each learning
outcomespecifiesthelevelofskillrequiredofcandidatesandthusthelevelatwhichcandidatesmay
betested.
The syllabus requires that candidates have the ability to apply, understand and analyse the subject
matter.Eachlearningoutcomebeginswithoneofthesecognitiveskills:
Understanding Candidates must be able to link pieces of information together in cause and effect
relationships. Typically questions may ask Why. Questions set on an understand learning outcome
cantesteitherknowledgeorunderstandingorboth.
Analysis To answer questions requiring analysis, the candidate must be able to break information
down into parts, identify how each piece relates to the whole, associate relevant aspects and
determinecoursesofaction.Typicallyquestionswillrelatetoagivensetofcircumstancesorprovide
datawhichrequiresanalysissoaconclusioncanbedrawn.
E92ExaminationGuide2015/2016
ExaminationGuide
ExaminationInformation
ThemethodofassessmentfortheE92examinationis25multiplechoicequestions(MCQs)and5case
studies,eachcomprising5MCQs.90minutesareallowedforthisexamination.
TheM92syllabusprovidedinthisexaminationguidewillbeexaminedfrom1May2015until30April
2016.
CandidateswillbeexaminedonthebasisofEnglishlawandpracticeunlessotherwisestated.
The general rule is that legislative and industry changes will not be examined earlier than 3 months
aftertheycomeintoeffect.
E92 examinations test the Financial Conduct Authority and Prudential Regulation Authority rules and
regulations.
Whenpreparingfortheexamination,candidatesshouldensurethattheyareawareofwhattypically
constituteseachtypeofproductlistedinthesyllabusandascertainwhethertheproductswithwhich
theycomeintocontactduringthenormalcourseoftheirworkdeviatefromthenorm,sincequestions
intheexaminationtestgenericproductknowledge.
SectionAconsistsof25multiplechoicequestions.Astandardformatmultiplechoicequestionconsists
of a problem followed by four options, labelled A, B, C and D, from which the candidate is asked to
choose the correct response. Each question will contain only one correct or best response to the
problemposed.Onemarkisawardedforeachcorrectresponseidentifiedbythecandidate.Nomark
isawardedifthecandidatechoosesanincorrectresponse,choosesmorethanoneresponseorfailsto
chooseanyresponse.Nomarksaredeductedforcandidateschoosinganincorrectresponse.
SectionBcontainsfivecasestudieseachfollowedbyfivequestions.Fouroptionsfolloweachquestion.
TheoptionsarelabelledA,B,CandD.Onlyoneoftheseoptionswillbecorrectorbest.Onemarkis
awardedforeachcorrectresponseidentifiedbythecandidate.Nomarkisawardedifthecandidate
choosesanincorrectresponse,choosesmorethanoneresponseorfailstochooseanyresponse.No
marksaredeductedforcandidateschoosinganincorrectresponse.
If you bring a calculator into the examination room, it must be a silent battery or solarpowered
nonprogrammablecalculator.Theuseofelectronicequipmentcapableofbeingprogrammedtohold
alphabetic or numerical data and/or formulae is prohibited. You may use a financial or scientific
calculator,provideditmeetstheserequirements.
Candidatesarepermittedtomakeroughnotes.Candidatesarenotpermitted,inanycircumstances,to
removeanypapersrelatingtotheexaminationfromtheexaminationroom.
E92ExaminationGuide2015/2016
ExaminationGuide
ExaminationTechnique:MultipleChoiceQuestions
Thebestapproachtomultiplechoiceexaminationsistoworkmethodicallythroughthequestions.
Thequestionsarewordedverycarefullytoensurethatalltheinformationrequiredispresentedina
concise and clear manner. It cannot be emphasised too strongly that understanding the precise
meaningofthequestionisvital.Ifcandidatesmissacrucialpointwhenreadingthequestionitcould
resultinchoosingthewrongoption.Candidatesshouldreadcarefullythroughthequestionandallthe
optionsbeforeattemptingtoanswer.
Candidatesshouldpayparticularattentiontoanywordsinthequestionwhichareemphasisedinbold
type, for example, maximum, minimum, main, most, normally and usually. Negative wording is
furtheremphasisedbytheuseofcapitalletters,forexampleNOT,CANNOT.
Candidatesshouldnotspendtoomuchtimeonanyonequestion.Iftheycannotmakeuptheirmind,
theyshouldleavethequestionandcomebacktoitlater.
Whenallofthequestionshavebeenanswered,itisprudenttouseanyremainingtimetogothrough
each question again, carefully, to doublecheck that nothing has been missed. Altering just one
incorrectresponsetoacorrectresponsecouldmakethedifferencebetweenpassingandfailing.
AftertheExamination
Rigorous checks are made to ensure the correctness of the results issued. A predefined quota of
passestobeawardeddoesnotexist.Ifallcandidatesachieveascoreofatleastthepassmark,thenall
candidates will be awarded a pass grade. Individual feedback on the candidates examination
performance is automatically provided and will indicate the result achieved and, for each syllabus
learningoutcome,thepercentageofquestionsintheexaminationthatwereansweredcorrectly.
E92ExaminationGuide2015/2016
Assumed knowledge
It is assumed that the candidate already has the knowledge gained from a study of the fundamental
principles of insurance as covered in IF1, Insurance, legal and regulatory, or equivalent examinations.
Number of questions
in the examination*
Important notes
Method of assessment
Mixed assessment for M92 of which both elements must be individually passed. This consists of:
1. an online coursework assignment using RevisionMate consisting of 10 questions which
sequentially follow the learning outcomes. This must be successfully completed within 6 months
of enrolment; and
2. a multiple-choice question (MCQ) exam at one of the CIIs online centres (paper based MCQs are
available in April and October for those sitting outside the UK). The MCQ exam consists of 25
MCQs and 5 case studies followed by 5 MCQs each. 90 minutes are allowed for this examination.
This exam must be successfully passed within 18 months of enrolment.
This syllabus will be examined from 1 May 2015 until 30 April 2016.
Candidates will be examined on the basis of English law and practice unless otherwise stated.
Candidates should refer to the CII website for the latest information on changes to law and practice
and when they will be examined:
1. Visit www.cii.co.uk/updates
2. Select the appropriate qualification
3. Select your unit on the right hand side of the page
2015
The Chartered Insurance Institute 2015
M92
1.
1.1
4.
4.1
1.2
1.3
1.4
Risk management.
1.5
1.6
1.7
Legal/regulatory.
2.
2.1
2.2
2.3
2.4
3.
3.1
3.2
3.3
3.4
3.5
3.6
2015
The Chartered Insurance Institute 2015
Claims.
Compliance.
Investment.
4.2
5.
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
6.
6.1
6.2
6.3
2 of 4
7.
7.1
7.2
Profitability;
Productivity;
Liquidity;
Activity, including turnover;
Gearing.
7.3
7.4
Reading list
8.
8.1
8.2
8.3
2015
The Chartered Insurance Institute 2015
3 of 4
Ebooks
The following ebooks are available through Discovery via
www.cii.co.uk/discovery (CII/PFS members only):
Fundamental aspects of operational risk and insurance
analytics. Marcelo G. Cruz. Wily, 2015.
Fundamentals of enterprise risk management: how top
companies assess risk, manage exposure and seize
opportunity. John J. Hampton. New York: American
Management Association, 2015.
Wiley GAAP 2015: interpretation and application of
generally accepted accounting principles. Joanne M.
Flood. Chichester: Wiley, 2015.
Reference materials
Dictionary of insurance. C Bennett. 2nd ed. London:
Pearson Education, 2004.
Concise encyclopedia of insurance terms. Laurence S.
Silver, et al. New York: Routledge, 2010.*
International Financial Reporting Standards. IFRS
Foundation. London: IFRS Foundation. Annual.
Lamonts glossary: the definitive plain English money
and investment dictionary. Barclay W Lamont. 10th ed.
London: Taxbriefs, 2009. Also available online via
www.cii.co.uk/lamont (CII/PFS members only).
Manual of accounting. 4v. PriceWaterhouseCoopers.
Haywards Heath: Bloomsbury Professional. Annual.
* Also available as an ebook through Discovery via
www.cii.co.uk/discovery (CII/PFS members only).
Examination guides
An examination guide, which includes a specimen paper,
is available to purchase via www.cii.co.uk.
If you have a current study text enrolment, the current
examination guide is included and is accessible via
Revisionmate (www.revisionmate.com). Details of how to
access Revisionmate are on the first page of your study
text.
2015
The Chartered Insurance Institute 2015
4 of 4
Examination Guide
SECTIONA
1. Themostcommonreasonwhyamutualinsurancecompanywoulddemutualiseisto
A. raisecapital.
B. reduceitsregulatoryburden.
C. transactlifeassurance.
D. undertakereinsurancebusiness.
2. TheindependentcompaniesappointedbyLloydsunderwritingmemberstounderwritebusiness
areknownas
A. brokers.
B. franchises.
C. managingagents.
D. syndicates.
3. InwhatprincipalwayhastheUKslegalsysteminfluencedthegrowthoftheinternational
insurancemarket?
A. AllinsurancepoliciesissuedbyUKinsurersaresubjecttoEnglishlaw.
B. Englishcaselawisrecognisedanditspracticeisfollowedineverycountry.
C. InternationalinsurancedisputesarealwaysreferredtoEnglishcourts.
D. ManyinternationalinsurancecaseprecedentshavebeendevelopedunderEnglishlaw.
4. Whenacompanyseekstoplayaroleinsocietyviasponsorshipandcommunityprojects,thisis
knownas
A. anethicalstandard.
B. aprinciplesbasedapproach.
C. ashareholderfocus.
D. astakeholderperspective.
5. Alifeassurancecompanywantstogrownonorganicallythroughhorizontalintegration.Thiscan
mostcommonlybeachievedby
A. acquiringasmallreinsurancecompany.
B. acquiringaspecialistgeneralinsurancecompany.
C. mergingwithalargebrokernetworkcompany.
D. mergingwithanotherlifeassurancecompany.
6. Whatisapubliccompanylegallyobligedtodo,whichaprivatecompanyisNOT?
A. Appointacompanysecretary.
B. ComplywiththeFinancialConductAuthoritysConductofBusinessRules.
C. Purchaseerrorsandomissionsinsurance.
D. RegisterwithCompaniesHouse.
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7. Aninsurerusesbalancedscorecardsasastrategicmanagementtool.Themainpurposeofthisisto
A. calculateinsurancepremiums.
B. calculateitsfinancialstrength.
C. measureperformance.
D. reduceitscosts.
8. Inthecontextofmanagementinformationsystems,thecontrolcycleisbestdescribedasthe
A. comparisonagainstaplanandproductionofreportsbyexception.
B. compilationandredistributionofanorganisationscollectiveskills.
C. consultationbetweenamanagerandhisteammembers.
D. provisionofconditionswhichwillhelpamanagerachievehiskeyobjectives.
9. AninsurersArticlesofAssociationwillinclude
A. detailsoftheinsurerstechnologymanagementstrategy.
B. methodsforbuildinguprelationshipswithcustomers.
C. theregulationsfortherunningoftheinsurersinternalaffairs.
D. specifictechniquestoidentifyriskwithintheinsurer.
10. Aninternationalcompositeinsurerisdraftingitsannualreport.InaccordancewiththeCompanies
Act2006,whatisthepositionregardingtheinclusionofachairmansstatementinthisreport?
A. Itismandatoryinallcircumstances.
B. Itisonlyrequiredifadirectorsreportisalsoincluded.
C. Itisonlyrequiredifadirectorsreportisnotincluded.
D. Itisoptionalinallcircumstances.
11. Aninsurerholdsclaimsdetailsonanexpolicyholder.WhenwouldtherequirementsoftheData
ProtectionAct1998stopapplyingtothisinformation?
A. Threeyearsafterthepolicyisterminated.
B. Uponconvictionofinsurancefraud.
C. Uponthedeathofthepolicyholder.
D. Uponrejectionofaclaim.
12. Whichdepartmentwithinaninsurancecompanywillprimarilyberesponsibleforanalysing
potentialmergersandacquisitions?
A. Finance.
B. Internalaudit.
C. Investment.
D. Strategy.
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13. Towhomisfinancialaccountingmostuseful?
A. Financialanalystsonly.
B. Internalmanagementonly.
C. Theregulator.
D. Stakeholders.
14. Oneofthemaindifferencesbetweenfinancialaccountsandmanagementaccountsisthatonly
A. financialaccountsarelegallyrequired.
B. financialaccountsareproducedonacalendaryearbasis.
C. managementaccountsareausefulindicationofliquidity.
D. managementaccountsarerequiredtobeaudited.
15. Whichdocumentwillbestgiveanindicationofacompanysliquidity?
A. Auditorsreport.
B. Cashflowstatement.
C. Directorsreport.
D. Incomestatement.
16. Acompanypurchasedamachinewithausefullifeofeightyearsfor24,000.Itsresidualvalueat
theendofthisperiodisestimatedtobe2,000.Whenusingstraightlinedepreciation,howmuch
depreciationisshownintheaccountssolelyforyeartwoofthisperiod?
A. 2,750
B. 3,000
C. 5,500
D. 6,000
17. Afigurehasbeeninsertedinacompanysbalancesheetinrespectofmachinery.Underwhich
headingwillthisnormallyappear?
A. Currentassets.
B. Currentliabilities.
C. Noncurrentassets.
D. Noncurrentliabilities.
18. Theinternalrateofreturnismostcommonlyusedtomeasurethe
A. constraintsthatdepartmentsareworkingunder.
B. viabilityofundertakingfutureprojects.
C. reductioninyieldresultingfromexternalcosts.
D. reductioninyieldresultingfromfixedcosts.
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19. Inadditiontoinflation,whatexternalinfluenceshouldaninsurerprimarilytakeintoaccountwhen
calculatingapersonalinjuryclaimreserve?
A. Actuarialpremiumrateincreases.
B. Frequencyofcatastropheclaims.
C. Marketshareofliabilitybusiness.
D. Recentclaimlitigationawards.
20. Whenreservingforclaimsunderlongtailinsuranceclasses,theamountscanbediscountedto
allowfor
A. CorporationTax.
B. costsavings.
C. investmentincome.
D. marketrisk.
21. Whichfinancialratiogivesanindicationofaninsurersunderwritingyearperformance?
A. Claimsratio.
B. Combinedratio.
C. Creditturnoverratio.
D. Currentratio.
22. Acompanysmeasureofliquidityisindicatedbyacurrentratioof1.36andaquickratioof1.28.
Thedifferencebetweenthetworatiosisdueto
A. debtors.
B. depreciation.
C. goodwill.
D. stock.
23. WhichtypeofactivityintheStandardandPoorsinsuranceratingsframeworkismostlikelytobe
classifiedasamodifier?
A. Committeevoting.
B. Enterpriseriskmanagement.
C. Gearingratioanalysis.
D. Industryandcountryrisk.
24. Whoarrangesforacreditratingagencytoproduceafinancialsecurityratingonaninsurance
company?
A. Externalauditors.
B. TheGovernment.
C. Theinsurancecompany.
D. Theregulator.
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25. Aninsurerintendstoassessitspositionviaausetest,tocomplywithproposedchangesin
regulations.Thisformspartoftherulesrelatingto
A. capitaladequacy.
B. claimsreserves.
C. internalaudit.
D. risktolerance.
E92ExaminationGuide2015/2016
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Examination Guide
SECTIONB
AUKinsurerhasrecentlymergedwithaUSbasedinsurertoformaninternationaloperationwith
itsheadofficeinLondon.Thetwobooksofbusinessareuncorrelated,whichwasadeliberate
mergerstrategybybothcompanies.
TheUKandUSinsurershavesignificantlydifferentinformationtechnology(IT)platformswhichwill
needtobereviewed.MattleadstheITDepartmentfortheUKinsurerandAdamtheIT
DepartmentfortheUSinsurer.
Intheirinitialdiscussions,bothMattandAdamagreethatanexternalserverfarmshouldbe
consideredtoimproveefficiency.TheneworganisationplanstofundpartoftheITprojectfrom
reserves.
Theyalsointendtorecommendaplantorationalisetheirdepartmentsunderthenewlyformed
organisation.MattoperatesanopendoorpolicyandAdamahierarchicalstyleofmanagement.
26. Thestrategybehindtheformationoftheneworganisationindicatesthatthemainfocuswas
A. anincreasedpresenceinanichemarket.
B. aninvestmentopportunityinglobalequities.
C. toreduceitsoverallsolvencycapitalrequirement.
D. totakefullcontroloversourcesofsupply.
27. ThesignificantdifferencebetweenthemanagementstylesofMattandAdamisthat
A. AdamismorefocusedthanMattonbuildingteamspiritandmorale.
B. AdamismorelikelytoconsulthisstaffthanMatt.
C. MattwillbeseenasbeingmoreapproachablethanAdam.
D. MattwillbeseenasbeingmoreautocraticthanAdam.
28. Inrespectoftheneworganisation,astatutoryexternalauditwill
A. belegallyrequiredtoensurethatmanagementaccountsreflectthecombinedorganisation.
B. belegallyrequiredtoensurethatthecombinedaccountstrulyreflectthefinancialposition.
C. onlyinspecttheUKinsurersrecords.
D. onlyinspecttheUSinsurersrecords.
29. Whataretheimplicationsoftheneworganisationusingaserverfarm?
A. Thecurrentserversusedbyeachorganisationwillbecompletelycompatible.
B. Dailyautomaticdatabackupwillnolongerbenecessary.
C. Thedataheldbyeachcompanywillbeconsolidatedandcleansedbyanindependentserver
provider.
D. Serverstoragespacewillbetransferredtoindependentpremises.
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30. WhatistheconsequenceofusingsomeofthereservestofundtheITproject?
A. Anysubsequentincreaseinprofitsmaypasstoshareholdersasdividends.
B. Thelevelofcurrentliabilitieswillbeincreased.
C. Thelevelofgearingwillbeincreased.
D. Netcurrentassetswillbedepleted.
E92ExaminationGuide2015/2016
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Examination Guide
Leoisthefinancedirectorofaninsurer.Theinsurer,astandalonecompany,hasrecently
purchasedasubsidiarycompany.Boththeinsurerandthenewsubsidiaryuseclaimsdevelopment
tablesundertheInternationalFinancialReportingStandards(IFRS)requirements.
Theinsurernowhasaccesstocapitalfromthesubsidiarycompany.Leohasbeenaskedbyan
investortoclarifythepositionregardingtheinsurerscapitalrequirementsonanongoingbasis.
Theinsurersfinancialdataindicatesthat,overthreeyears,thecombinedratiohaschangedfrom
101.2%to99.7%.
31. WhatwillLeosactivitiesmostlikelyinclude?
A. Calculationofindividualclaimsreserves.
B. Identifyingdependenciesthroughflowprocessanalysis.
C. Preparationforreviewsbyratingagencies.
D. Pricingofnewinsuranceproducts.
32. Howwilltherecentacquisitionofthesubsidiarybeshownontheinsurerscashflowstatement?
A. Asacashinflowfromfinancingactivities.
B. Asacashinflowfrominvestmentactivities.
C. Asacashoutflowfromfinancingactivities.
D. Asacashoutflowfrominvestmentactivities.
33. Theuseofclaimsdevelopmenttablesprovidesvaluableinformationaboutthe
A. abilitytochargehigherprices.
B. levelofunrealisedgainsandlosses.
C. natureofbreachesofinternalcontrols.
D. priorestimatesofoutstandingamounts.
34. Inanswertotheinvestorsqueryregardingcapitalrequirementsonanongoingbasis,Leoshould
explainthat
A. allfinancialstatementsmustbeassessedandviewedonaconsolidatedbasis.
B. appropriateadjustmentsmaybeneededtosatisfytheregulator.
C. providedallthefiguresareincludedontheinsurersbalancesheet,noadditionalissuesarise.
D. therewillbenoadditionalregulatoryrequirementsprovidedthatnotradingtakesplace
betweenthetwocompanies.
35. Thechangeinthecombinedratioismostlikelytoindicatethattheinsurerhas
A. increaseditsadministrationexpenses.
B. increaseditslongtermborrowing.
C. improveditsinvestmentreturns.
D. improveditsunderwritingresults.
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Timisthesupervisorofateaminaninsurersinternalauditdepartment.Heinvolvesasmany
teammembersaspossiblewhenmakingdecisions.
Twonewemployeeshaverecentlyjoinedtheteam.Thenewteammembersareexperiencedin
theareasofcustomercomplaintsandinformationtechnologysecuritymanagement.
Theinsurerscultureistokeepservicesinhouseasfaraspossible.
TheinsurerisconsideredtobealargecompanyandBevhasbeenappointedtoitsaudit
committee.Bevseekstounderstandthefullfinancialpositioninrespectoftheinsurerand
regularlycheckstheusualfinancialratios.Theinsurerhasundertakenaliquidityratiocalculation
andtheresultislowerthanthesamecalculationundertakenlastyear.
36.WhatmanagementstyledoesTimoperate?
A. Autocratic.
B. Democratic.
C. Hierarchical.
D. Paternalistic.
37. ThechangestopersonnelinTimsteamaremostlikelytohavebeendrivenby
A. anincreaseinthenumberofthemedreviewsintheauditplan.
B. theneedtoactasthepointofcontactforregulators.
C. theneedtoreporttoboththeauditcommitteechairmanandmorethanoneseniorexecutive
onreportfindings.
D. asignificantincreaseinoutsourcedreviewsasdecreedbytheboardofdirectors.
38. TheCorporateGovernanceCodeonauditcommitteesrequiresthatBevwill
A. beaqualifiedactuary.
B. berequiredtoworkundertheguidanceoftheexternalauditor.
C. regularlyreviewtheeffectivenessofTimsteam.
D. requirejustoneotherpersontoworkwithher.
39. Withregardtothevariousmanagementreportsthatareproducedinrespectoftheinsurer,Tims
team
A. collatesanyrequiredbytheregulator.
B. overseestheproductionofthoserequiredsolelyformanagementpurposes.
C. verifiesanyrequiredbytheregulatorbeforetheyaresent.
D. verifiestheirreliabilityandaccuracy.
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40. Theresultoftherecentliquiditycalculationindicatesthatsincelastyeartheinsurer'sliquidityhas
A. becomemorevolatile
B. worsened.
C. improved.
D. beenunaffected.
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Examination Guide
Zoeworksforaninsurerwhichisawhollyownedsubsidiaryofabank.Theinsurerhasrecently
startedamajornewsalescampaignviatheinternetandthebankfeelsthatthenewcampaignwill
offersignificantbenefitsforitscustomers.Thepoliciessoldthroughthiscampaignwillusually
havemonthlypremiumpayments.
Zoeactsinafirstresponseroleintheinsurersclaimsdepartmentandiscurrentlyhandlinga
householdpolicyclaimfromTomwheresignificantpropertydamagehasoccurred.
Zoesfriend,George,worksatthesameinsurerinthefinancedepartment.Includedamongsthis
tasksistheresponsibilityforraisingdebitnotes.
Duetosignificantexpenditureontheinsurerscampaign,forwhichresultsareonlyjustbeginning
tocomethrough,theinsurersreturnonequity(ROE)ratioiscurrently6%.
Standard&PoorshasplaceditsratingfortheinsurerunderCreditwatchwithadevelopingflag.
41. Thesignificantbenefitstothebankscustomersofthenewcampaignrunbytheinsureraremost
likelytorelateto
A. theavailabilityofnonstandardclassesofbusiness.
B. higherstandardsandwideravailabilityofcustomerservice.
C. arangeofoptionsoncoverandprice.
D. specificallytailoredsolutionsfortheindividualcustomer.
42. ZoesspecificroleinrespectofTomsclaimisto
A. ensuretheclaimispaidpromptly.
B. minimisethepotentialforfurtherdamage.
C. obtainauthoritytomakeaninterimpayment.
D. overseetherepairsprocess.
43. Thesignificanceofthecreditratingisthatthecurrentrating
A. mayberaised,loweredoraffirmed.
B. willshortlybeaffirmed.
C. willshortlybelowered.
D. willshortlyberaised.
44. ForwhattransactionswillGeorgeraisedebitnotes?
A. Allamountsowedtothebusinessbyotherparties.
B. Allmoniesowedbythebusinesstootherparties.
C. Moniesowingtoreinsurersandforoutstandingclaimsonly.
D. Premiumsowedbypolicyholdersonly.
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45. WhatdoestheinsurersROEof6%indicate?
A. Theinsurerisbeingchargeda6%interestrateonitslongtermborrowings.
B. Theinsurerismakinga6%profitrelativetoitscapital.
C. Theinsurerisobtaininga6%interestrateonitsinstalments.
D. Ashareholderismakinga6%profitbeforetaxonhisinvestment.
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Examination Guide
Mickisasupervisorinaninsurerscustomerservicedepartment.Hehasreceivedacomplaint
fromapolicyholder,Meg,regardingtheuseofherpersonaldatabytheinsurersoutsourcedcall
centreinIndia.Shedoesnotthinkthiscentrehasanyrighttoknowherpersonaldetails.Mickis
abletoverifythatthecorrectprocedurehasbeenfollowed.
Mickiscollatingdataforareviewofactivitiesagainstkeyperformanceindicators(KPIs).Mostof
thisdatarelatestoeffortorientedKPIs,butoneparticularmeasurecausingconcernrepresentsthe
bottomline.Mickhasreferredthisconcerntomanagement,whoareassessingappropriate
actiontobetakeninaccordancewiththesecondlineofdefence.
Theinsurerusesanactivitybasedcostingsystem.Micksdepartmentisregardedasaprofitcentre
forthispurpose.
Thefollowingfinancialdataisavailableintheinsurersaccounts:
Claims
Expenses
AcquisitionCosts
EarnedPremiumNetofReinsurance
80,000,000
12,000,000
17,000,000
110,000,000
46. Micksconfirmationthatthecorrectprocedurehasbeenfollowedismostlikelytobedueto
A. appropriateregulatoryapprovalforuseofthecallcentre.
B. thechoicesmadeintheinsurersdataprotectionregistration.
C. theleveloftraininggiventotheemployeesinthecallcentre.
D. Meghavinggivenherexpressconsentinheroriginalapplication.
47. TheKPImeasurecausingconcerntoMickismostlikelytobe
A. thenumberofcomplaintsresolvedwithinaplannedtimeframe.
B. areductioninmarketshare.
C. asignificantincreaseinstaffturnover.
D. stafffailingtorespondtosurveysonstaffrelations.
48. FollowingthereferralfromMick,whatactionshouldbetakenbytheinsurer?
A. Determinechangesrequiredtoreducetheleveloftheproblems.
B. Disciplinethestaffconcerned.
C. Disclosetheissuetotheregulator.
D. Implementarecoveryplan.
49. Undertheactivitybasedcostingsystemusedbytheinsurer,Micksdepartmentwill
A. beallocatedafixedcostperannumbyacentraldepartment.
B. beinvoicedbyacentraldepartmentonacostperunitbasis.
C. chargeotherdepartmentsafixedcostperannum.
D. operateazerobasedbudgetingapproach.
E92ExaminationGuide2015/2016
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Examination Guide
50. Theinsurerscombinedratiois
A. 83.63%
B. 88.18%
C. 99.09%
D. 100.91%
E92ExaminationGuide2015/2016
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ExaminationGuide
SpecimenExaminationAnswersandLearningOutcomesCovered
Learning
Outcome
StandardFormatQuestions
LearningOutcome1
1
A
1.1
2
C
1.2
3
D
1.3
4
D
1.4
5
D
1.6
5Questions
Question Answer
LearningOutcome2
6
A
2.1
7
C
2.3
8
A
2.4
3Questions
LearningOutcome3
9
C
3.2
10
D
3.3
11
C
3.6
3Questions
LearningOutcome4
12
D
4.2.2
1Question
Question Answer
LearningOutcome5
13
D
14
A
15
B
16
A
17
C
18
B
6questions
LearningOutcome6
19
D
20
C
2questions
LearningOutcome7
21
B
22
D
2questions
LearningOutcome8
23
B
24
C
25
A
3questions
E92ExaminationGuide2015/2016
Learning
Outcome
5.1
5.2
5.3
5.4
5.6
5.9
6.2
6.3
7.1
7.4
8.1
8.2
8.3
Question Answer
Learning
Outcome
ScenarioQuestions
LearningOutcomes1to8
26
C
1.6
27
C
2.2
28
B
3.5
29
D
4.2
30
A
5.6
31
C
2.1
32
D
5.7
33
D
6.1
34
B
8.3
35
D
7.4
36
B
2.2
37
A
4.2
38
C
3.1
39
D
5.2
40
C
7.4
41
C
1.5
42
B
4.1
43
A
8.2
44
A
5.5
45
B
7.3
46
D
1.7
47
B
2.3
48
A
3.4
49
B
5.8
50
C
7.4
25questions
25