Sept 14

So, how did you all find it?

I fell ill the Saturday before the exam on Monday, and I didn't feel great during my exam I could hardly sleep the Monday night either - what a serious disappointment! So overall it was bad again for me, especially the Monday exam. April 2015

 

Sorry to hear that you weren't well - have that tshirt (previous exam) - its the last thing you need going into an exam. I don't think too many slept well the night between for obvious reasons - i was lucky enough there was an NFL match on til 5am to keep my mind off round2.
I didn't study much for this exam (April results out in July hmmmm!) so i was expecting to struggle so was happy when i made a decent attempt with both papers - made reasonable attempt at all questions - there was an 8 mark question on Paper1 something about using risk man process to price a product (energy product with a price ceiling) that i didn't really understand but hey its only 4% over the 2 papers. Nothing out of the blue really, no wacky manage a creche, build a bridge type questions - everything seemed closely related to the course content - didn't need to be too creative with our answers. I got tight for time on Paper2 alright. And i found myself making relevant points that i knew wouldn't probably be on the marking schedule but thats all part of CA1 i guess. I would expect the pass rate too be fairly high.

 

Question:
Sept 2014 Paper2 Q5 (iii) for [10] marks.
Discuss the use of a standard model for determining an insurance company's Solvency Capital Requirements compared with an internal model. Consider this from the perspective of:
(a) an insurance company.
(b) a regulator.
...
Query:
(1) Ok this is a 10 mark question presumably split 5 marks and 5 marks {or even possibly more weighted towards part (a)} i.e. they are probably looking for 10 points for each. Looking back at the course notes this question relates to Ch. 47 Pages 17-20 however most of this content relates to the actual background of how the SM calc's compare to the IM calc's. I interpreted the question as a comparison of "the uses" of the models rather than how the actual models worked (and also we are asked about the perspectives from insurers and regulators view - leading me to think the question wasn't looking for IM/SM details but rather their uses). I put down the obvious points from the notes that the IM takes more time, more expense, is more complex, captures the actual risk profile of the company, is more appropriate to the company, would need additional staff/team to implement and update, more expertise required, would involve more checking and correspondence and also approval from the regulator and how a regulator could use SM to benchmark against company's IM's.
(2) The only other course material re. SM and IM is descriptions of the calc's (how SM is based on stress test, scenario and factor based capital charges) and the additional uses of the IM (Var and TailVar EC, different CI levels and time horizons, non SM risk classes).
(3) I didn't feel that (2) was relevant to the question asked and so I gave (1) as my answer but felt this alone was enough for 10 marks so I put down about the 6 different tests that the IM should comply with - especially the importance of the Use Test in daily decision making and I also described the IMAP (IM pre-approval) process where the insurer would have to work with the regulator over a period to build a suitable model and get this signed off by regulator. However looking back now this is not on the CA1 notes - its material from SA2. Perhaps it is additional knowledge that it is felt CA1 students should have.
Summary:
Was (1) enough for the 10 marks. Or do they want (2) also even though we were asked about the "use of" rather than the actual models. Was (3) additional points that they were looking for - I see (3) as being as relevant as (1). I feel the marks were high compared to the material given on the notes so I am not sure what exactly they were looking for.
thanks for any feedback

 

Bump

Any tutor want to stick their necks out on this one....i promise i won't compare your answer to the solutions in December

 

Hi misterh!



Isn't that too specific for CA1? I'd have thought that that would be SA level detail? I'm aware of some of the points you made because our regulation in South Africa is based very closely on Solvency II but it's my understanding that CA1 is general and doesn't speak to those sorts of specifics - eek - I basically wrote all the points in part 1 and 2 of what you said plus some other points I seem to have remembered from a previous "internal models vs standard models" question. 10 marks was rough though - I wonder where they expected us to generate the points from, so perhaps you DO have a point... seems unfair, dunno, wait and see?