IAI Actuarial Core Principles · Business Management · Skills and knowledge for working as an actuary in financial services
A life insurer in Pune is launching a new term product. The actuarial team first states the business problem: the insurer wants to enter the affordable protection market while keeping solvency within the board's risk appetite. Which stage of the Actuarial Control Cycle does this activity represent?
This is the specifying the problem stage. The actuaries are defining the objectives and constraints, namely market entry and solvency within risk appetite, before any modelling or pricing begins. Developing a solution and monitoring experience come in later stages of the control cycle.
- ASpecifying the problemCorrect
- BDeveloping the solution
- CMonitoring the experience
- DImplementing the product launch
- Reviewing the regulatory filing
Explanation
The first step of the Actuarial Control Cycle is specifying the problem: understanding the client's objectives, the context and the constraints such as risk appetite. Developing the solution comes later, when models and assumptions are built. Monitoring is the final, feedback stage.
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