This are my questions

A bank has approached a general insurance company to underwrite a creditor insurance product which the bank intends to offer to customers who take out a loan. If the customer became unable to repay the loan due to redundancy or illness, the insurance company would cover the repayments for up to 12 months. The bank has specified that it wants to charge a flat fee for the product, i.e. all customers pay the same premium. Discuss the advantages and disadvantages of a flat fee from the viewpoint of both the bank and the insurance company

A large general insurance company sells various insurance products. It collects a range of premium and claims data. Set out how the various users of the data are likely to use the data

Motor insurers in a well developed market have raised concerns about increasing levels of fraud. The industry body representing motor insurance companies has proposed creating a central database containing policyholders' claims histories. The purpose of the database is to enable insurers to take into account past fraudulent activity when insuring new customers. Discuss the factors the industry body should take into account when planning the database

Describe how each of the following approaches can be used to price an excess of loss reinsurance treaty: (i) Burning cost method. (ii) Original loss curves.

"Insurance Co" is a large general insurance company selling both commercial and personal motor insurance. The board of the company has decided to review its reinsurance coverage. Discuss the factors the board is likely to take into account when deciding on its future reinsurance coverage

(i) Describe the following models of aggregate claim distributions, stating, for each, the model assumptions: (a) Individual risk model. (b) Collective risk model

(ii) Outline how simulation error can be reduced when a stochastic method is used

11 (i) List the reasons for setting up a captive insurance company. [3] In the country of Actuaria, personal accident products are available that pay out a one-off lump sum if the insured suffers permanent total disability following an accident. In order to ensure that claimants are not under or over-compensated, the government has decided to introduce a single discount rate which adjusts the lump sum to take into account the return expected over time when that lump sum is invested. The industry body representing the insurers is responding to this government decision. (ii) Discuss the issues the industry body would consider in their response. [9] (iii) Describe how this discount rate introduction is likely to affect captive insurers.

1. Consider a European call option and a European put option on a nondividend-paying stock. You are given: (i) The current price of the stock is 60. (ii) The call option currently sells for 0.15 more than the put option. (iii) Both the call option and put option will expire in 4 years. (iv) Both the call option and put option have a strike price of 70. Calculate the continuously compounded risk-free interest rate. (A) 0.039 (B) 0.049 (C) 0.059 (D) 0.069 (E) 0.079

2. Near market closing time on a given day, you lose access to stock prices, but some European call and put prices for a stock are available as follows: Strike Price Call Price Put Price $40 $11 $3 $50 $6 $8 $55 $3 $11 All six options have the same expiration date. After reviewing the information above, John tells Mary and Peter that no arbitrage opportunities can arise from these prices. Mary disagrees with John. She argues that one could use the following portfolio to obtain arbitrage profit: Long one call option with strike price 40; short three call options with strike price 50; lend $1; and long some calls with strike price 55. Peter also disagrees with John. He claims that the following portfolio, which is different from Mary's, can produce arbitrage profit: Long 2 calls and short 2 puts with strike price 55; long 1 call and short 1 put with strike price 40; lend $2; and short some calls and long the same number of puts with strike price 50. Which of the following statements is true?

(A) Only John is correct. (B) Only Mary is correct. (C) Only Peter is correct. (D) Both Mary and Peter are correct. (E) None of them is correct.

3. An insurance company sells single premium deferred annuity contracts with return linked to a stock index, the time-t value of one unit of which is denoted by S(t). The contracts offer a minimum guarantee return rate of g%. At time 0, a single premium of amount is paid by the policyholder, and y% is deducted by the insurance company. Thus, at the contract maturity date, T, the insurance company will pay the policyholder (1 y%) Max[S(T)/S(0), (1 + g%)T]. You are given the following information: (i) The contract will mature in one year. (ii) The minimum guarantee rate of return, g%, is 3%. (iii) Dividends are incorporated in the stock index. That is, the stock index is constructed with all stock dividends reinvested. (iv) S(0) = 100. (v) The price of a one-year European put option, with strike price of $103, on the stock index is $15.21. Determine y%, so that the insurance company does not make or lose money on this contract. (A) 12.8%. (B) 13.0% (C) 13.2% (D) 13.4%