SOA ILA LAMIndividual Life & Annuities — Life ALM & Modeling

Fellowship (FSA)

5 hours·≈10 written-answer questions·≈400 study hours

Score 0/0 · 4 MC

ILA LAM · Q1
Multiple choice
Asset-liability management & interest-rate risk
Assets 1,000 with duration 6; liabilities 900 with duration 8. Surplus duration is:
ILA LAM · Q2
Written answer
Asset-liability management & interest-rate risk
A single-premium deferred annuity block has a 5-year surrender charge schedule and a book-value surrender option. Assets are 7-year corporate bonds. (a) Describe the ALM risks in both rising and falling rate environments. (b) Recommend three actions to manage the mismatch. (c) Explain why modified duration understates the liability's rate sensitivity.