Free Practice Questions for PRMIA 8009 Exam

Can have their own offices, bylaws and regulations provided they do not conflict with those of PRMIA

Can have meetings that only local members are allowed to attend

Can sign contracts on behalf of PRMIA without prior approval from the Board of Directors

All of the above

Both relied on a star manger, supposedly in a low risk business.

Both losses grew over time, but were not discovered by management until too late.

Both traded in illiquid and obscure markets that were easy to manipulate.

Both losses were eventually exposed by massive margin calls.

LPHI Risk; Business Model; Solvency vs. Liquidity: and Deposit Protection

Corporate Governance; Moral Hazard; Role of Government; and Credit Risk

Deposit Protection; Moral Hazard; Business Model; and LPHI Risk

Business Model; Corporate Governance; Moral Hazard; and Deposit Protection

Separation of front and back offices

More senior level involvement at Barings regarding use of derivatives

Recognition that large profits can be an indicator of higher risk

All of the above

Recapitalise Fannie Mae and Freddie Mac with US$2.4 billion of additional capital to ensure they weathered the risks associated with any future downturn in the housing markets

Provide grants of US$800 million to help home buyers with down-payment and closing costs

Allow risky, high-cost loans to be credited towards affordable housing goals

Provide tax credits of nearly US$2.4 billion over the next 5 years to investors and builders who developed affordable single-family housing in poor and distressed areas

transfers only a limited amount of risk at the usual reinsurance price

transfers the total risk at less cost than traditional reinsurance

transfers the total risk at the usual reinsurance price

transfers only a limited amount of risk at less cost than traditional reinsurance

No properly defined risk management policies in place and general lack of oversight by senior management

Time value was not taken into account during the contract valuation process

Loss generating positions were rolled over by selling options on larger positions to generate cash premiums' to settle existing position losses

Senior management in China were aware of the positions but did not understand the complexities of risk managing them

relied almost entirely on Fortress Re's management team for information on the risks in its portfolio

relied on the information it received from other members of the reinsurance pool to manage its risks

had a full understanding from Fortress Re of the risks in the pool

had a full understanding from other members of the pool of the pool's liabilities

Inadequate separation of front and back offices

Model risk

Changes/breakdowns in historical correlations

Unwinding of liquid positions at the beginning of major losses

PRMIA Standards

the standards of the organization where the work is being performed

his / her established personal standards of work approved in previous work situations

local regulatory authority standards which may be less onerous than PRMIA standards