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Board of Regents  |  University of the State of New York

LOMA | Evaluated Learning Experience

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Risk Management and Product Design for Insurance Companies (LOMA 371)

Formerly Managing for Solvency and Profitability in Life Insurance Companies (LOMA 371)
Formerly Managing for Solvency and Profitability in Life Insurance Companies [FLMI 371]
Formerly: 
Location: 
Independent study and proficiency examination program administered from the central offices of LOMA.
Length: 

Varies-independent study.

Dates: 

Version 1: June 1996 - June 2002. Version 2: July 2002 - June 2008. Version 3: July 2008 - Present.

Instructional delivery format: 
Proficiency exam
Learner Outcomes: 

Version 1: Upon successful completion of the course, students will be able to: recognize the importance of solvency and profitability and how they are measured in an insurance company context; understand the economic and financial implications of risk/return trade-off and the trade-off between current profit and long-term growth; identify the factors insurers must consider when developing and pricing products to ensure that products are both profitable and competitive in the financial services marketplace; understand and use asset-share models to price products profitably; explain the effects of new business strain on reserves and capital; understand the fundamentals of how capital management and asset/liability management are applied in insurance companies; apply various tools for monitoring financial performance and understand the role of rating agencies and regulations in solvency surveillance; understand the complexity of the financial underpinnings of a life and health insurance company; and describe the importance of expense control and revenue growth to a company's long-term success and what today's companies are doing in these areas. Version 2: Upon successful completion of the course, students will be able to: recognize the importance of solvency and profitability and how they are measured; understand the risk-return tradeoff in finance; identify factors insurers consider when designing life insurance and annuity products; use an asset-share model to gain greater understanding of product profitability; explain the effects of surplus strain on insurers; explain how mortality affects life insurance and annuity benefit costs; describe how company expenses affect product design and company profitability; describe approaches insurance companies use for managing their capital; and explain how insurance companies raise new capital from outside of the company. Version 3: Upon successful completion of the course, students will be able to: explain the importance of solvency and profitability and how they are measured in an insurance company context; describe the complex area of risk management for life insurance companies, from the typical risks that insurers face to the practices of asset-liability management (ALM) and enterprise risk management (ERM); explain how company expenses affect product design and company profitability and describe the importance of expense control; describe how insurers use financial modeling to support their ongoing profitability and explain the tools that insurers use financial modeling to support their ongoing profitability and explain the tools that insurers use to interpret the results of financial modeling; describe the basic steps of the product development process and identify the factors that insurers must consider when designing life insurance and annuity products; describe the basic concepts that apply to the time value of money and be able to perform a variety of calculations using these concepts; explain how mortality affects life insurance and annuity benefit costs; and describe the benefits provided by life insurance and annuity products and explain how these benefits must be factored into every product design.

Instruction: 

Version 1: Major topics include: introduction to solvency and profitability; balancing returns with solvency; creating forecasts and developing assumptions; planning and designing financial products; the time value of money; product profitability measures and asset-share models; pricing products to reflect expenses and investment income; pricing products to reflect insurance risk; reserves; introduction to capital management; capital planning; internal sources of capital; issuing financial instruments; uses of reinsurance; tools of monitoring financial performance; orientation to asset/liability management; solvency surveillance by regulators; restructuring the corporate form; keys to profitability. Version 2: Major topics include: profit and profitability for insurance companies; risks insurers face; measuring financial strength; external monitoring of solvency and claims-paying ability; regulatory provisions addressing financial distress; introduction to capital management; planning for capital needs; internal sources of capital; issuing equity and debt securities; reinsurance for capital management; expense control and profitability; restructuring the corporate form; how insurers develop new products; technical product design; operating expenses and product design; mortality tables and the mortality charge; investment earnings and interest; interest and future values; interest and present values; life insurance premiums-bundled products; costs of annuities and universal life insurance; product modeling and asset share-models; assumptions in product models; contractual reserves and cash values. Version 3: This course gives the actuarial view of a life insurance organization and its products by describing financial product design for life insurance and annuities and the current state of risk management in insurance companies. Topics include: orientation to profitability and solvency; risk management in life insurance companies; controlling expenses and risks in operations; financial modeling for life insurance and interpretation of modeling results; new products and product development, including technical product design; time value of money concepts; cash values and accumulation values; mortality expense; life insurance product designs; annuity benefit costs; dynamic applications in product modeling; profitability measures.

Credit recommendation: 

Version 1, 2, and 3: In the upper division baccalaureate degree category, 3 semester hours as an elective in Finance or Insurance (12/97) (6/02 revalidation) (1/08 revalidation) (3/10 revalidation) (11/17 revalidation).  

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