Spring 2019 Q19 b

Tony88passTony88pass
in CIA.FCT

Hi Graham,

Not sure if the sample solution is outdated, it states throughout the forecast period the MCT is greater than 150% thus satisfactory, shouldn't it compare with the internal target ratio of 180% instead?

Comments

  • grahamgraham

    Yes, the examiner's report solution is outdated as indicated in the BattleTable. (Problems highlighted in orange are outdated calculation problems.) But note that the internal target isn't always 180%. That varies based on company. If you look at the practice problems in that section of the wiki, you'll see that the internal target does indeed vary but it should always be at least 150%.

  • ThrowGrowThrowGrow

    Hi Graham,

    Are part a, c and d outdated as it's marked in the battlecards - past exam?
    https://battleactsmain.ca/FC.php?selectString=**&filter=both&sortOrder=natural&colorFlag=allFlag&colorStatus=allStatus&priority=&prefix=all&suffix=all&section=all&subSection=all&subsetFlag=exam&examRep=all&examYear=19&examTerm=1-Spring&quizNum=0&select07=0&select08=0&select09=0

  • grahamgraham

    The link you included brings up 108 BattleCards. Can you send me the link to the specific exam problem you're referring to?

  • ThrowGrowThrowGrow

    Hi Graham, sorry about that. I am referring to question 2019 Spring Q19.

    https://battleactsmain.ca/pdf/Exam_(2019_1-Spring)/(2019_1-Spring)_(19).pdf

  • grahamgraham

    I marked most of the old DCAT problems as outdated in the BattleCards because even though some of them may still be partly valid, it seemed too confusing to try to pick and choose:

    • part (a) is somewhat outdated
    • part (b) is a valid question but has an outdated solution because the method for testing financial condition changed for FCT
    • parts (c) and (d) are probably ok to read over because ripple effects and management actions didn't change much for FCT
  • ThrowGrowThrowGrow

    Thanks Graham!

  • navinpass6cnavinpass6c
    edited April 2022

    For part (a), the answer says the insurer is at a satisfactory condition if:
     Throughout the forecast period, the base scenario is required to have MCT > 150%.
     Throughout the forecast period, assets are greater than liabilities.

    However, in the FCT reading, satsitfactory condition is only achieved if:

    • base scenario: ratio > internal target ratio
    • going concern: ratio >regulatory minimum ratio
    • solvency: assets > liabilities

    Why is there this differnce in criteria to determine if an insurer has acheived a satisfiactory financial condition?

  • Staff-T1Staff-T1

    As Graham mentioned above, this exam question was based on the old DCAT paper and not the latest FCT paper

  • ChristoRoyerChristoRoyer

    In the FCT reading, it is said that for the Solvency Scenarios, the criterias for being satisfactory is to have Asset higher than Liabilities (for Going Concern MCT > 1). If we make the assumption that all three adverses scenarios shown here are Solvency Scenatios, could we answer the same thing as the Examiner's Report?

  • Staff-T1Staff-T1

    Just to point out here that your MCT needs to be > internal target throughout the projection period and the answer key is incorrect.
    Yes, the answer key is assuming that these 3 scenarios shown are solvency scenarios. You could also state your assumption that these are going concern scenarios and answer the question with that in mind. It is up to you

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