SOFE AFE Designation AFE Questions & Answers

• Question 31:

  Short-term portfolios are:

  A. Portfolios consisting of liabilities with maturities of one year to meet dollar needs.

  B. Portfolios consisting of combined revenues of less than one year to meet liquidity needs.

  C. Portfolios consisting of assets with maturities of less than one year to meet liquidity needs.

  D. Portfolios consisting of expenses with maturities of less than or equal to one year to meet dollar needs.

  Correct Answer: C

• Question 32:

  Asset and liability management is:

  A. An approach of matching assets and liabilities that requires a correct mix of long and short term investments.

  B. An approach of mix assets and liabilities in a financial statement that requires specific long and short term revenues.

  C. An approach of mix assets and liabilities in a financial statement that requires specific long and short term revenues.

  D. An approach of specific assets and liabilities in a financial statement that requires correct mix of long and short term revenues.

  Correct Answer: A

• Question 33:

  Liabilities are recognized for known claims when sufficient information has been developed to indicate the involvement of a specific insurance policy.

  A. True

  B. False

  Correct Answer: A

• Question 34:

  Reporting investments, set requirements regarding matters such as location of asset and set limitations on investing in future are all prescribed by a method called:

  A. Insurance investment

  B. State regulations

  C. Intent of investment

  D. Market security lending

  Correct Answer: B

• Question 35:

  The estimated liability includes the amount of money that will be used for future payments of:

  A. Reported claims to insurer

  B. Claims related to insured events

  C. Claim adjustment expenses

  D. All of the above

  Correct Answer: D

• Question 36:

  What represents the amounts needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before a particular date?

  A. Independent claim adjustment

  B. Payment of claims

  C. Insured claim adjustments

  D. Claim adjustment expenses

  Correct Answer: D

• Question 37:

  Which of the following is Correct?

  A. the financial position of an entity with a 2-to-1 reserve-to-surplus ratio is less affected by variability in its loss reserves than is an entity operating at 4-to-1 ratio.

  B. the financial position of an entity with a 2-to-1 reserve-to-surplus ratio is more affected by variability in its loss reserves than is an entity operating at 4-to-1 ratio.

  C. the financial position of an entity with a 4-to-1 reserve-to-surplus ratio is less affected by variability in its loss reserves than is an entity operating at 2-to-1 ratio.

  D. the financial position of an entity with a 4-to-1 reserve-to-surplus ratio is more affected by variability in its loss reserves than is an entity operating at 2-to-1 ratio.

  Correct Answer: A

• Question 38:

  A lower net retention level typically would translate into a higher v\variability of reserves.

  A. True

  B. False

  Correct Answer: B

• Question 39:

  An increase in loss reserves may lead to offset by a reduction in premiums and a decrease in loss reserves may be a receivable for additional premiums.

  A. True

  B. False

  Correct Answer: B

• Question 40:

  For reinsurance assumed, the concepts analogous to attachment points and limits are referred to as

  A. Severity Levels

  B. Frequency Levels

  C. Policy levels

  D. Retention levels

  Correct Answer: D