Free CAS Exam 6-U.S. (Regulation and Financial Reporting) Solvency, Specialty Markets & Emerging Regulation Practice Questions
Practice 45 free Solvency, Specialty Markets & Emerging Regulation questions for CAS Exam 6-U.S. (Regulation and Financial Reporting).
Sample Questions
Question 1
Easy
Under the federal Liability Risk Retention Act, which description best characterizes a risk retention group (RRG)?
Solution
C is correct. Under the Liability Risk Retention Act, a risk retention group is an insurer owned by its members who are engaged in similar businesses and share similar liability exposures. The group bears the members' risk, may write only liability coverage, is chartered and licensed in a single domiciliary state, and can then operate in other states largely exempt from non-domiciliary licensing and most host-state regulation. That single-license-plus-interstate-reach design is the defining feature of the RRG.
Question 2
Medium
An insurer reports total adjusted capital of $85M and an authorized control level (ACL) risk-based capital of $100M. Into which RBC action level does this place the insurer?
Solution
D is correct. The RBC ratio equals total adjusted capital divided by ACL RBC: . A ratio between 70% and 100% of ACL RBC triggers the Authorized Control Level, at which the domiciliary regulator is permitted (but not yet required) to place the insurer under regulatory control in addition to the remedies available at higher levels.
Question 3
Hard
A property-casualty insurer reports RBC components (in $millions): R0 = 15, R1 = 40, R2 = 30, R3 = 25, R4 = 70, R5 = 50. Total Adjusted Capital is $105M. Authorized Control Level RBC equals one-half of the covariance-adjusted total RBC. Which RBC action level does the insurer fall into?
Solution
B is correct. Apply the covariance adjustment: . Total RBC = R0 + that root = . Authorized Control Level RBC = . The RBC ratio = TAC / ACL RBC = . A ratio between 150% and 200% triggers the Company Action Level, requiring the insurer to file a corrective plan.