PRMIA 8009 Value Pack (Frequently Bought Together)

The Fortress Re finite reinsurance model

• A. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, but as the risks were spread out over time the future premiums were not accounted for as current liabilities on the books of the pool members, thus giving a false impression of profitability
• B. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the future premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability
• C. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid annual premiums to cover these policies, and as the risks were spread out over the year the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability
• D. allowed Fortress to claim re-insurance claims payments from the finite reinsurers and paid premiums to cover these deals over a 5 year period, and as the risks were spread out over time the annual premiums were accounted for as current liabilities on the books of the pool members, giving a true impression of profitability

Which of the following was not received by Northern Rock as official support from the UK banking and government authorities?

• A. A covert money market support operation designed to cover up the difficulties Northern Rock was facing
• B. The Bank of England provided an additional unlimited facility secured on the collateral of all Northern Rock assets
• C. The Bank of England's role as Lender-Of-Last-resort was activated at a penalty interest rate of 150 basis points above the Bank Rate
• D. The UK government offered to guarantee all existing and new retail deposits, and to most other creditors

When describing the reasons for the collapse of China Aviation Oil, which of the following was not cited?

• A. Loss generating positions were rolled over by selling options on larger positions to generate cash premiums' to settle existing position losses
• B. Senior management in China were aware of the positions but did not understand the complexities of risk managing them
• C. Time value was not taken into account during the contract valuation process
• D. No properly defined risk management policies in place and general lack of oversight by senior management

A risk manager is asked to analyze the credit risk of a convertible bond. The risk manager has never analyzed convertible bonds, but does have significant expertise in credit risk. The risk manager accepts the assignment, finds a paper on the subject through the PRMIA web site and copies the method used there. The risk manager completes the assignment and delivers a report to his or her direct supervisor and the supervisor is quite pleased.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), this was acceptable behavior if the following conditions were met:
I. The risk manager disclosed the lack of knowledge about convertible bonds II. The methodology employed is disclosed and explained III. The report was just to be used for analysis and not in practice IV. The risk manager was sure of his/her understanding of the paper found on the web

• A. I and II
• B. I, II and III
• C. I, II and IV
• D. I only

Unlike the case at Barings Bank, National Australia Bank:

• A. Had a risk management infrastructure that was credited with doing its' job well, despite the losses
• B. Had a Board of Directors that was unaware of the true nature of trading activities
• C. Was not dealing in derivatives
• D. Had a separation of duties between trading and back office