Spring 2017 Q5
I had questions about part b and c because I'm looking for clarification on if guaranty state fund is pre-funded or post-funded
Is the most common process for assessing insurers ****AFTER**** an insurer goes insolvent? I was under the impression that all solvent insurers pre-funded the guaranty fund each year or whatever to make sure fund had enough capital in case of someone going insolvent.
I imagine that would take a while to collect WP from all other solvent insurers in the state and is not fair to make solvent insurers pay for mistakes of insurer that goes insolvent.
Comments
You are correct that it is pre-funded: market participants pay about 1-2% of annual premium in assessments.
The statement "post-insolvency assessment can still cause market disruptions . . ." in sample 1 doesn't make sense to me. It is not repeated in other samples.
But the examiners report for part b) was saying that the most common process was assessing insurers after an insurer goes insolvent?
I am going to go with what you're saying but just wanted to make sure you were aware what the report was saying.
I don't see this statement in the xaminer report.
There is no 2017.Spring.5. Are you looking at 2017.Fall.5?
I am also confused about this topic. Most of the exam questions I am finding say that the most common way of funding a guarantee fund is post-solvency. The best example is Spring 2017 #5, which is one of the exam questions listed for the Porter-Reg2 reading. That might be why you were not finding it?
Based on past exams, it seems that guaranty funds can be funded 2 ways:
Can someone confirm? Also, not sure if this thread should be moved to Porter Reg-2, which is where the exam problem is.
Ok, your statement is correct. Pre-insolvency is in the Porter.12-Insolvency wiki, and post-insolvency is in the Porter.Reg-2 wiki. Sorry about this patchwork of notes.