B
Benjamin
Member
Hi,
I'm finding it difficult to nail down a good response strategy as the ActEd solutions to questions don't always take a consistent approach.
E.g. Revision book 4, question 11 (April 2010 Question 4) asks about impact on solvency position of some scenarios, including a worsening in the lapse rate on UL policies.
For a 10-mark question and three scenarios, you would thus expect 2 to 3 marks per scenario plus some intro and general comments.
For the UL policies mentioned above, the revision book solution mentions:
- Possible improvement of solvency position from lapse profit if reserves + SCR exceed surrender value
- Possible worsening of solvency position due to increasing per policy overheads and reserves going up
The first point is made across two bullets but this is essentially one point in total.
It does not mention, just as a few examples:
- Markets have imploded so investment products may have biting guarantees, actually causing losses on surrender
- Loss of income from funds management charges meaning a need to increase non-unit reserves in general for remaining products
- Loss of future income from allocation rates and bi/offer spread on unit purchases that would have been made by those policyholders that lapsed, having the same effect
- The shift in total business mix of the company towards protection products (which are more capital intensive) if many savings products lapse
In the exam, time does not allow for writing everything about everything so could you advise please some strategies for triaging the points that need to be hit?
I'm finding it difficult to nail down a good response strategy as the ActEd solutions to questions don't always take a consistent approach.
E.g. Revision book 4, question 11 (April 2010 Question 4) asks about impact on solvency position of some scenarios, including a worsening in the lapse rate on UL policies.
For a 10-mark question and three scenarios, you would thus expect 2 to 3 marks per scenario plus some intro and general comments.
For the UL policies mentioned above, the revision book solution mentions:
- Possible improvement of solvency position from lapse profit if reserves + SCR exceed surrender value
- Possible worsening of solvency position due to increasing per policy overheads and reserves going up
The first point is made across two bullets but this is essentially one point in total.
It does not mention, just as a few examples:
- Markets have imploded so investment products may have biting guarantees, actually causing losses on surrender
- Loss of income from funds management charges meaning a need to increase non-unit reserves in general for remaining products
- Loss of future income from allocation rates and bi/offer spread on unit purchases that would have been made by those policyholders that lapsed, having the same effect
- The shift in total business mix of the company towards protection products (which are more capital intensive) if many savings products lapse
In the exam, time does not allow for writing everything about everything so could you advise please some strategies for triaging the points that need to be hit?