Question #19
Reading: Reading 11 Analysis of Financial Institutions
PDF File: Reading 11 Analysis of Financial Institutions.pdf
Page: 7
Status: Incorrect
Correct Answer: B
Your Answer: C
Question
Which of the following statements comparing Property and Casualty insurers to Life and Health insurers is least likely correct?
Answer Choices:
A. Life and Health insurers typically face more predictable claims than Property and Casualty insurers
B. The calculation of Property and Casualty insurers minimum capital requirements is more likely to factor in exposure to interest rate risk
C. Property and Casualty insurers typically require a higher equity cushion and hence can have higher capital requirements
Explanation
Property and Casualty insurers typically face more unpredictable claims and hence have
higher capital requirements.
Life and Health insurers are more likely to sell products with material exposures to
interest rate risk and hence they, not Property and Casualty insurers, are more likely to
factor that risk into capital requirements.