I honestly don't even know where to start with this question especially on part (iii). On part (ii) looking at the answers there's plenty of things that an insurer would consider for the discount rate being introduced but why would an industry body include all those things in a response to the government? The government are unlikely to care if reinsurance costs for insurers are going to change, they will only really care that the insured is paid a fair amount and if costs insurers more (or less) then so be it. Some points might be fair enough to include like questions about how it will be calculated and how often it is reviewed, but then there's other points in the answers that are bizarre. One point is there might be a change in the risk of reinsurance default, I don't even see why that would be the case, never mind why an industry body would include it in a response to the government? Part (iii) is just outrageous, even looking at the answers I have no idea how any students would come up with them. Would have been a hard question for 5 marks if it asked for impact on insurers who sell the product, never mind about captives. I don't think I even understand why captives would be that worried about it, surely captives don't sell personal accident products to individuals and so won't be that affected? Maybe if they sell Employer's Liability to a parent company but the question says its specifically personal accident products. The Examiners report says that part (iii) was very poorly answered, not really surprising - maybe an indicator that the question is a bit stupid? Of the 14 marks for the 2 parts I think I would have done well to get 2. It's so frustrating that there are these questions that are so left-field that can have so many marks and then the actual answers given are only half relevant. I don't know, am I way less prepared than I thought or is this question just bizarre?
Don't forget that you will not be the only candidate that will have found this question tricky. When faced with these sorts of questions in the exam try and apply the knowledge that you have learnt elsewhere in the course to the specific situation. Even some common sense suggestions such as "premiums may increase for some policyholders if the insurer passes the increase on to them" were on the marking schedule. Another approach to use here is that every time you come up with a point ask yourself questions such as "so what?", that could help you to generate more ideas. For example, if you suggest that "reinsurance recoveries may increase", then that means "reinsurance premiums may also increase as a result". The industry body will be representing the insurers, so they will want to explain to the government why the proposal may cause issues for the companies they are representing, hence for example why the comments on reinsurance recoveries and hence reinsurance premiums increasing have been included in the marking schedule.
