SCI CLUS04 Practice Questions - SCI CLU® S CLUS04 Life Insurance Company Operations (Singapore) Exam

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In life insurance profit testing, an actuary calculates the Net Present Value (NPV) of future profits by discounting projected annual net profit cash flows. What discount rate is typically used for this calculation?

The insurer's target Risk Discount Rate (RDR), which reflects the cost of capital and product risk profile The risk-free yield on 10-year Singapore Government Securities (SGS) without risk adjustment The statutory minimum policy loan interest rate prescribed by the Monetary Authority of Singapore The historical average inflation rate over the preceding 20 years

Correct Answer:

The insurer's target Risk Discount Rate (RDR), which reflects the cost of capital and product risk profile

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