Free CAS Exam 6-U.S. (Regulation and Financial Reporting) The Appointed Actuary: SAO, AOS & Professionalism Practice Questions
Practice 139 free The Appointed Actuary: SAO, AOS & Professionalism questions for CAS Exam 6-U.S. (Regulation and Financial Reporting).
Sample Questions
Question 1
Easy
The Actuarial Opinion Summary (AOS) is best described as which of the following?
Solution
E is correct. The AOS is a confidential document filed separately with the domiciliary commissioner. It discloses the appointed actuary's point estimate and/or range and compares those figures with the reserves the company actually carried, giving the regulator detail beyond the public SAO. Because it can reveal a gap between the actuary's estimate and carried reserves, it is kept confidential and is not part of the publicly filed Annual Statement.
Question 2
Medium
In preparing the SAO, the Appointed Actuary must include a specific relevant comment for certain situations. Which of the following most clearly requires such a comment?
Solution
E is correct. Retroactive reinsurance is accounted for differently from prospective reinsurance and can materially affect the presentation and adequacy of reserves, so the Appointed Actuary must add a relevant comment describing the reliance and its effect on the opinion. Routine operational, governance, or capital-distribution events with no reserving impact do not trigger such comments.
Question 3
Hard
An appointed actuary's range of reasonable estimates is $780 million to $840 million. The company carries reserves of $770 million, and the actuary's materiality standard is $25 million. Which opinion should the actuary issue?
Solution
B is correct. Reasonableness of the carried reserves is judged against the range of reasonable estimates, not against the materiality standard. Carried reserves of $770 million fall $10 million below the $780 million low end of the range, so the reserves do not make a reasonable provision and the actuary issues a deficient (inadequate) opinion. The materiality standard governs risk-of-material-adverse-deviation disclosure, not whether reserves outside the range can be deemed reasonable.