Preview Questions Actuary | Role Specific Skill

Question 1: In actuarial financial forecasting, what is typically used to model catastrophic events and their impact on reserves?

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Linear regression

Poisson distribution

Normal distribution

Extreme value theory (EVT)

Question 2: For a risk-based insurance pricing model, which of the following data transformations is necessary when dealing with highly skewed data?

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Exponential Transformation

Z-score Normalization

Standard Deviation Scaling

Logarithmic Transformation

Question 3: When forecasting premium income in an actuarial model, which factor is most critical for determining the accuracy of the forecast?

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The expected policyholder retention rates

The historical average of claims paid

The risk-free interest rate over the forecast period

The expected payout ratio for the claims

Question 4: How would you model the capital requirement for an insurance company under Solvency II using a deterministic approach?

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Stress testing

Risk-based capital approach

Economic capital model

Internal model method

Question 5: How does the "Generalized Linear Model" (GLM) apply to insurance pricing, and what are the benefits of using GLM over traditional pricing methods?

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GLM should be avoided due to its complexity and high computational cost

GLM allows for the modeling of complex relationships between variables like age and claims frequency, improving the accuracy of price predictions

GLM can only be used for personal lines insurance, not commercial lines

GLM is irrelevant for pricing and should be replaced by simpler models

Question 6: When creating a financial model to price an annuity product, which method would you use to discount future cash flows?

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Modified Dietz method

Multi-period compounded growth

Discounted Cash Flow (DCF)

Black-Scholes formula