Effective Study Techniques for the PRMIA 8004 Exam

Volume growth at the expense of margin

Excessive reliance on volatile and sophisticated derivatives

A failure to try to protect their clients' interests

Over exposure to the property market

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

unhedged

hedged using exchange-traded futures with longer maturities than the retail contracts

hedged using exchange-traded futures with shorter maturities than the retail contracts

fully hedged using exchange-traded futures of the same maturities as the retail contracts

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

The risk manager has submitted the report to their direct supervisor and their obligation ends at this point, nothing further should be done

The risk manager should attempt to resolve the conflict with the direct supervisor, but if that does not work, they should contact the Whistle-Blowing Hotline of the organization. If no such hot-line is in place, they should contact the PRMIA Ethics Committee

Escalation of the issue is against the Code of Conduct because one should respect the administrative structure of the organization

If the risk manager deems it appropriate, he / she should send a copy of the original report to the CEO

Only a few months previously it had reported record profits.

The quality of its' assets was never in question.

For many years it was regarded as a star-performer in the financial markets.

Its' loan loss record was poor by industry standards.

Eliminates risk to the greatest extent possible

Is defined as the assembled knowledge and wisdom of the collective stakeholders in the organization, set to maximize shareholder value

Is defined as business decision making predicated on a belief in potential rewards, balanced with the knowledge, understanding and appreciation of the risk taken to pursue those potential rewards

Is defined as that which is best practiced within an enterprise risk management framework, guided by the PRMIA Standards of Best Practice, Conduct and Ethics above all else

Political corruption and poor management

Over exposure to the property market

Rash guarantees given to investors in property linked funds

All of the above

Leeson ran the front office

The London office did not ask for any reports

Leeson hid his trades in a suspense account

The margin report sent to London did not show the true margin needs

made it straightforward for TFMI to determine whether risk had actually been transferred and they decided not to take out more catastrophe insurance cover

made it difficult for TFMI to determine whether risk had actually been transferred so they had to take out additional catastrophe insurance cover

made it straightforward for TFMI to determine when the risk had been transferred and to take out additional catastrophe insurance cover

made it difficult for TFMI to determine whether risk had actually been transferred and whether it had sufficient catastrophe insurance cover