CAS Exam 7 Spring 2014, Question 18

Study guide: Exam 9

Part a (0.5 points)

Define market risk and credit risk.

Part b (1.5 points)

Identify and briefly describe three types of market risk that an insurer may face.

Part c (1 point)

Briefly describe how market risk and credit risk each affect the value of both invested assets and insurance liabilities.

Part d (1 point)

Given the following amounts (in $000,000) for each risk factor:

• Market risk of assets: 100
• Credit risk of assets: 40
• Market risk of liabilities: 40
• Credit risk of liabilities: 10

Assuming non-negative correlations, calculate a range for total risk from these factors.

Answer this question and see the worked solution

Concepts tested

• Risk Management
• Concentration Risk
• Reinvestment Risk
• Financial Risk
• Credit Risk
• Risk Taxonomies

More questions from this set

• CAS Exam 7 Spring 2014, Question 17
• CAS Exam 7 Spring 2014, Question 19