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IAI Actuarial Core Principles · Business Economics · Relationship between economics and business

An Indian insurer is reviewing factors outside its control that affect its business. Which of the following would be classed as part of its macro (external) environment rather than its internal environment?

A change in the RBI repo rate belongs to the external macro environment because the insurer cannot control it, whereas distribution choices, staff skills, underwriting rules and culture are internal factors that management can influence.

  1. AA change in the Reserve Bank of India's repo rate affecting bond yieldsCorrect
  2. BThe insurer's choice of distribution channels
  3. CThe skills of its actuarial team
  4. DIts internal underwriting guidelines
  5. Its corporate culture and values

Explanation

Monetary policy set by the central bank is an external economic factor the insurer cannot control. The other options are internal choices or characteristics of the firm that management can change directly.

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