AIDA 182 EXAM 2024-2025 QUESTIONS AND ANSWERS
What is loss development? - answer>>The increase or decrease of incurred losses over time.
How are loss reserves handled on financial statements? - answer>>They are liabilities on the
balance sheet.
What is the purpose of loss reserves? - answer>>To estimate the liability for losses that have
occurred but have not yet been settled.
What best describes the reserves a reinsurer must have? - answer>>Amounts obligated in the
future to pay primary insurers.
When accounting for accident year losses for year 2016, what would be included? - answer>>A
reserve change in 2017 for a loss that occurred in 2016.
PIC had loss reserves at year end last year of $28 million. During the first quarter of this year,
PIC's reserves were reevaluated to be $32 million. What is the financial impact of loss reserve
increases? - answer>>Policyholders' surplus will be reduced.
What is true of case reserves? - answer>>Reinsurers may supplement the primary insurer's case
reserves for their own financial reporting purposes.
What is a negative of the average method of case reserves? - answer>>It may produce reserves
that are too low for insurance with wide variation in claims.
The average method of case reserving is best for what insurance? - answer>>Insurance with
claims that are reported and paid promptly.
The tabular method of determining case loss reserves would be best for what? - answer>>A
structured settlement amount for a liability insurance claim.
,What case reserving method establishes average amount for all claims with similar
characteristics such as age, health, and marital status? - answer>>Tabular method.
What reserving method should be used for a large book of first party automobile policies? -
answer>>Average method.
What method uses historical relationships between incurred but not reported reserves and
reported losses in incurred but not reported forecasts? - answer>>Percentage method.
What do INBR reserves represent the different between? - answer>>Ultimate losses and
reported incurred losses.
The difference between incurred losses and ultimate losses is? - answer>>INBR reserves
Who sets the level of bulk reserves for an insurer? - answer>>Actuary.
What is true of the loss ratio method in establishing bulk reserves for INBR losses? -
answer>>The loss ratio method should only be used for the first year or two after losses are
incurred.
Which one of the following statements regarding the calculation of the reserve for unallocated
loss adjustment expenses is accurate? - answer>>It is usually estimated as a percentage of the
sum of incurred losses and allocated loss adjustment expenses.
Hazard analysis is what? - answer>>A method that identifies conditions that increase the
frequency or severity of loss.
What is the least effective method of identifying all personal property loss exposures? -
answer>>Loss histories.
What document helps identify bottlenecks? - answer>>Flowcharts.
, To estimate adverse financial affects from business interruption due to accidental loss, what
should you use? - answer>>Balance sheet.
What is true of checklists and questionnaires? - answer>>The questions include in the
questionnaires and checklists developed by insurers relate mainly to loss exposures for which
commercial insurance is generally available.
A diagram that graphically and sequentially depicts the activities of a particular organization or
process is what? - answer>>A flowchart.
What is a benefit of a compliance review? - answer>>The can help minimize or avoid liability
loss exposures.
What can be used to identify net income loss exposures? - answer>>Income statement.
Weakness of risk assessment questionnaire? - answer>>The structure of the questionnaire may
not stimulate the user to do anything more than fill in the blanks to answer the questions posed.
The best method to identify all owned property exposures is? The worst is? - answer>>Personal
inspections. Loss histories.
To avoid under or overestimating loss projections, past loss data must be presented in what? -
answer>>Constant dollars.
To accurately analyze loss exposure data, the data needs to be what? - answer>>Relevant,
complete, consistent, and organized.
When developing loss severity distributions, data should be organized how? - answer>>By size
of loss.
What is loss development? - answer>>The increase or decrease of incurred losses over time.
How are loss reserves handled on financial statements? - answer>>They are liabilities on the
balance sheet.
What is the purpose of loss reserves? - answer>>To estimate the liability for losses that have
occurred but have not yet been settled.
What best describes the reserves a reinsurer must have? - answer>>Amounts obligated in the
future to pay primary insurers.
When accounting for accident year losses for year 2016, what would be included? - answer>>A
reserve change in 2017 for a loss that occurred in 2016.
PIC had loss reserves at year end last year of $28 million. During the first quarter of this year,
PIC's reserves were reevaluated to be $32 million. What is the financial impact of loss reserve
increases? - answer>>Policyholders' surplus will be reduced.
What is true of case reserves? - answer>>Reinsurers may supplement the primary insurer's case
reserves for their own financial reporting purposes.
What is a negative of the average method of case reserves? - answer>>It may produce reserves
that are too low for insurance with wide variation in claims.
The average method of case reserving is best for what insurance? - answer>>Insurance with
claims that are reported and paid promptly.
The tabular method of determining case loss reserves would be best for what? - answer>>A
structured settlement amount for a liability insurance claim.
,What case reserving method establishes average amount for all claims with similar
characteristics such as age, health, and marital status? - answer>>Tabular method.
What reserving method should be used for a large book of first party automobile policies? -
answer>>Average method.
What method uses historical relationships between incurred but not reported reserves and
reported losses in incurred but not reported forecasts? - answer>>Percentage method.
What do INBR reserves represent the different between? - answer>>Ultimate losses and
reported incurred losses.
The difference between incurred losses and ultimate losses is? - answer>>INBR reserves
Who sets the level of bulk reserves for an insurer? - answer>>Actuary.
What is true of the loss ratio method in establishing bulk reserves for INBR losses? -
answer>>The loss ratio method should only be used for the first year or two after losses are
incurred.
Which one of the following statements regarding the calculation of the reserve for unallocated
loss adjustment expenses is accurate? - answer>>It is usually estimated as a percentage of the
sum of incurred losses and allocated loss adjustment expenses.
Hazard analysis is what? - answer>>A method that identifies conditions that increase the
frequency or severity of loss.
What is the least effective method of identifying all personal property loss exposures? -
answer>>Loss histories.
What document helps identify bottlenecks? - answer>>Flowcharts.
, To estimate adverse financial affects from business interruption due to accidental loss, what
should you use? - answer>>Balance sheet.
What is true of checklists and questionnaires? - answer>>The questions include in the
questionnaires and checklists developed by insurers relate mainly to loss exposures for which
commercial insurance is generally available.
A diagram that graphically and sequentially depicts the activities of a particular organization or
process is what? - answer>>A flowchart.
What is a benefit of a compliance review? - answer>>The can help minimize or avoid liability
loss exposures.
What can be used to identify net income loss exposures? - answer>>Income statement.
Weakness of risk assessment questionnaire? - answer>>The structure of the questionnaire may
not stimulate the user to do anything more than fill in the blanks to answer the questions posed.
The best method to identify all owned property exposures is? The worst is? - answer>>Personal
inspections. Loss histories.
To avoid under or overestimating loss projections, past loss data must be presented in what? -
answer>>Constant dollars.
To accurately analyze loss exposure data, the data needs to be what? - answer>>Relevant,
complete, consistent, and organized.
When developing loss severity distributions, data should be organized how? - answer>>By size
of loss.
