General Insurance Applications (GIA) Practice Questions - General Insurance Applications (GIA) - Actuaries Institute Fellowship Program Exam

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Under APRA Prudential Standard GPS 340 (Insurance Liability Valuation), what is the REQUIRED statistical standard for determining the risk margin applied to the central estimate of net outstanding claims liabilities for regulatory capital reporting?

The risk margin must be determined so that the total provision provides at least a 75% probability of sufficiency The risk margin must equal a flat 10% loading across all classes of general insurance business The risk margin must be calibrated to a 99.5% Value at Risk standard over a 1-year horizon The risk margin is optional if the insurer maintains an A+ credit rating from Standard & Poor's

Correct Answer:

The risk margin must be determined so that the total provision provides at least a 75% probability of sufficiency

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