CAS Exam 7 Spring 2014, Question 19
Study guide: Exam 9
A U.S.-domiciled insurance company is holding the following bonds:
- Bonds issued by a U.S.-based bank with credit rating of AA valued at $15 million. The mean time to maturity is five years.
- Bonds issued by a technology company located in the U.S. with credit rating of BBB valued at $20 million. The mean time to maturity is 10 years.
There are no other bonds held by the company.
Identify and briefly describe three key drivers of credit risk for the insurance company and briefly comment on how they relate to the insurer's bond portfolio.
Part a (2.25 points)
Answer this question and see the worked solution