Accredited Financial Examiner (AFE) Questions (286 Q&As)

1. When policy periods expire, the premiums written are earned and are recognized as:

2. As defined in Accounting Standards Codification, dollar purchase agreements are the agreements to sell and repurchase similar and identical securities.

3. For immediate annuities, this is the ______________, defined by the sequence of periodic

annuity benefit payments the policyholder is promised.

4. The profitability of an insurance entity on a statutory basis is generally gauged by:

5. The two most common types of dollar rolls are:

6. There is pending litigation concerning the acquisition of a subsidiary and it is probable such litigation will result in its divestiture is an example of:

7. In determining whether an operation is self-sustaining or integrated, what you do not need to consider is:

8. Evidences the fair market value of the property that is security for the mortgage loan. The appraisal value is used to determine that the loan to market value ratio is in compliance with regulatory requirements. It also is used to determine any non-admitted mortgage loan amount.

Appraisals are obtained from:

9. ________ allow investments to be made, up to a certain percent of invested or total admitted assets, in assets that do not otherwise meet regulatory requirements. If their domiciliary jurisdiction regulations have a this, a life insurer with a business purpose for doing so can make a limited amount of mortgage loans that do not meet regulatory requirements without a reduction in surplus.

However, some jurisdictions do exercise some extraterritorial jurisdiction related to it.

10. Fidelity bonds cover employees against dishonest acts by employees.

11. What must be properly coded to meet the statutory reporting requirements of the annual statement and to provide statistics to support filling?

12. What are especially effective in investment strategy, because of the powerful risk management attributes they provide?

13. A change in _______ or its application is appropriate if the change results in a measurement that is equally or more representative of fair value in the circumstances.

14. The loss reserve estimate is a significant estimate in the financial statements of an uninsured entity.

15. Federal Housing Administration:

16. Insurance entities usually write covered-call options because they consider the premium received for writing the options to be either:

17. When premium income less return premiums arising from policies issued or other contracts entered into reinsure other insurance entities that provide the related primary coverage are called:

18. A premium deficiency relating to which insurance contracts indicate a probable loss on premiums yet to be earned.

19. A company that has its loans serviced, for whatever reason, is usually charged a servicer’s fee. This fee is usually expressed:

20. The method used to account for insurance and reinsurance contracts that do not transfer insurance risk is referred to as:

21. Which of the following is the significant requirement for ongoing regulatory reporting to the Office of the Superintendent of Financial Institutions (“OSFI”)?

22. Audit regulatory is more reliable when it is obtained from knowledgeable independent sources inside the entity.

23. Which of the following is NOT the type of Merit rating?

24. What represent legal agreements between buyers or sellers and represent commitments to buy or sell financial instruments at specified dates and prices?

25. Which of the following may NOT involve a high degree of management judgment and subjectivity and may present risks of material misstatement due to fraud?

26. The difference between the purchase price and the repurchase price, or sale price, plus accrued interest on the security represents:

27. Which projection method uses paid losses plus reserves on outstanding claims?

28. There are many different sources of CMBS. Conduits and aggregate pools generally consist of loans newly originated, purchased or held by investment bankers until the pool is large enough for an efficient execution. Government agencies such as the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corp. (FHLMC) are important sources of:

29. What is considered “pure” mortality protection?

30. Internal Control is:

31. The entity transferring the risk is called the ceding entity and the entity to which the risk is transferred is called the assuming entity.

32. What are designed primarily to accumulate a fund for eventual liquidation via annuitization, so the savings element is predominant?

33. Which control includes the procedures for system design, including the acquisition of software packages, should encourage active participation by the accounting department and internal auditors?

34. Audit risk consists of:

35. Which of the following is NOT of equity market sensitivities that are usually considered in dynamic hedging?

36. Which investments held by life insurance enterprises should be carried in the balance sheet at amortized cost?

37. What represent the ownership interests in the net assets of the subsidiary held by persons outside the controlling entities’ structure?

38. Which counterparts of duration and convexity are the first- and second order sensitivities of an equity market instrument to changes in the price of the underlying?

39. In what, securities involve in repos are not delivered on the settlement date of the agreement and the contract may be extended upon mutual agreement of the buyer-lender and seller-borrower.

40. The value of the capital stock shown in the stock life insurance company’s statutory basis balance sheet equals the par value per share multiplied by the number of issued shares.

In the case of no-par stock:

41. The Module Rule requires the insurer to provide:

42. Valuation technique should be used to measure fair value and is consistent with:

43. When securities repurchased under repos commonly have a principal amount that differs from principal amount of the security originally sold under the agreement, is known as:

44. In which account current, for individual policies, the agent collects the premiums directly from the insureds, subtracts his or her commissions and remits the net premiums due to entity?

45. To meet informational demands, internal management reporting will entail alternate views of the organization’s financial performance.

These areas, or views, are including all of the following EXCEPT:

46. Home office record-maintenance methods may include:

47. Accounting for escrow funds is difficult because of the large number of transactions related to such funds.

A separate bank account or a trust bank account may be opened, with all escrow receipts deposited into it to prevent:

48. Tax Act states that:

49. Which of the following is Correct?

50. Which of the following in NOT the flow of transaction through the claims cycle?

51. The difference between the carrying value of the parent’s investment in subsidiary and the amount received is treated as a gain or loss in the:

52. What are batched, and input control totals are established before delivery to data entry?

53. The auditor responds to risks of material misstatements due to fraud in which of the following ways?

54. _______________ reserves for income tax purposes are referred to as maximum tax actuarial reserves (MTAR) and replace the actuarial liabilities used for accounting purposes in computing taxable income.

55. Financial statements of a self-sustaining foreign operation are translated using the current rate method whereby assets and liabilities are translated in the reporting currency using the exchange rate.

56. The pro rata portion of premiums written allocable to unexpired policy periods represents unearned premiums, which are reflected as in the balance sheet.

57. Scope of Examination and Report of Independent Certified Public Accountant states that:

58. What uses valuation techniques to convert future amounts to a single present amount?

59. What is the act in which the main sections are for Canadian companies and for foreign companies?

60. Mutual entities, reciprocal or inter-insurance exchanges, public entity risk pools are all principal kinds of:

61. Identification and documentation of the controls and policies which address the risk management issues for each of the Standards is the necessary step for:

62. Outgoing premiums less return premiums arising from reinsurance purchased from other insurance entities are called:

63. The SEC rules clarify that management’s assessment and report is limited to internal control over financial reporting.

64. A substantial investment is defined as any investment comprising more than 15 percent of an enterprise’s voting shares or greater than 35 percent of its equity.

65. Structured settlements are agreements characterized by the periodic payment of fixed amounts to a claimant in connection with the settlement of a legal claim. Such payments may last for the lifetime of the payee or they may be for a particular period of time, depending upon the terms of the settlement.

The party responsible for making structured settlement payments may make payments:

66. Experience refund provisions of group insurance contracts are most often concerned with the manner of distributing any profits between the insurer and the insured group. The agreements usually contain provisions specifying how losses will affect the profit allocations for the insured group.

In such situation:

67. When a retained asset account is established in the place of a cash settlement, an interest bearing account is created by the insurer for the beneficiary. The beneficiary receives a checkbook with which to draw upon funds in the new account.

The account holder can make:

68. The magnitude of the variable annuity benefits provided by a deferred annuity depends on the size of the account value at the end of the accumulation phase.

69. Which of the following is the objective to the evaluation and risk-accepting function?

70. What represent the ownership interests in the net assets of the subsidiary held by persons outside the controlling entities’ structure?

71. The evaluation and subsequent purchase or sale of investments is based on the judgment of the entity’s investment and finance committees.

72. By quantifying interest rate sensitivity, investment risk and can also indicate corrective actions.

73. According to Securities and Exchange Commission (SEC), “the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise” is called:

74. Excess liability:

75. In which of the following, Internal entity experience or information from published sources concerning recent trends in socioeconomic factors affecting claim payments:

76. Primary coverage involves policies written between an insurer and a customer directly.

77. In which premium income less return premiums arising from policies issued by the entity collecting the premiums and acting as the primary insurance carrier?

78. An entity’s practices concerning loss settlement, such as a practice of vigorously defending suits or of quickly settling suits, can have a significant effect on an entity’s loss experience.

79. Reduction for salvage is:

80. Which of the following is NOT the primary consideration for defining the capital of a company for purposes of measuring capital adequacy?