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LOMA 371 — Risk Management and Product Design for Insurance Companies

Course Type: Course Portal
Topics: Finance & Accounting, Life Insurance
Designations: FLMI, PFLP
Language: Chinese (simplified), Chinese (traditional), English, French, Portuguese


Overview

LOMA 371 describes technical product design for life insurance and annuities and the current state of risk management in insurance companies.

Topics

  • Financial Orientation to Life Insurance Companies
  • Risk Management in Life Insurance Companies
  • Controlling Expenses and Risks in Operations
  • Financial Modeling in Insurance Companies
  • New Products and Product Development
  • Technical Product Design, Product Introduction, and Product Monitoring
  • Incorporating Operating Expenses into Product Design
  • Time Value of Money
  • Cash Values and Accumulation Values
  • Mortality Tables and Assumptions
  • Managing Mortality Risk
  • Life Insurance Product Designs
  • Annuity Product Designs
  • Dynamic Applications in Product Modeling
  • Profitability Measures

Module 1: Risk Management, Expense Control, and Financial Modeling (Chapters 1–4)

Chapter 1: Financial Orientation to Life Insurance Companies

Flows of Funds

Profit and Financial Statements

Income Statement

Balance Sheet

Linking the Income Statement and the Balance Sheet

The Importance of Profitability

The Risk-Return Trade-Off

Balancing Profit and Risk

The Required Rate of Return and the Risk Premium

Solvency Standards

Managing Profitability and Solvency

International Regulations for Insurer Solvency

Contingency Risks for Insurers

Chapter 2: Risk Management in Life Insurance Companies

Typical Risks That Insurers Manage

Risk Management Strategies

Avoiding Risk

Controlling Risk

Accepting Risk

Transferring Risk

Asset-Liability Management

Risks and Returns

Portfolio Risk Management Strategies

ALM Reporting Systems

Enterprise Risk Management

A Risk Control Process

Extreme Event Management

A Risk Accountability Framework

A Risk Management Culture

Strategic Risk Management

Chapter 3: Controlling Expenses and Risks in Operations

Overview of Company Expenses

Investment Expenses

General and Administrative Expenses

Improving Operating Efficiency

Controlling Operating Expenses

Eliminating Expenses

Reducing Expenses

Managing Marketing and Distribution Expenses

The Employee’s Role in Supporting Operating Efficiency

The Challenge of Operational Risk

Managing Operational Risk

Developing Internal Controls

Measuring and Managing Operational Risk

Chapter 4: Financial Modeling in Insurance Companies

Components of Financial Models

Model Inputs

Model Processes

Model Outputs

Input Data for Financial Models

Experience Data

Estimates of Future Conditions

Data Quality for Financial Modeling

Modeling Approaches

Deterministic Modeling

Stochastic Modeling

Optimization Modeling

Results of Financial Modeling

Point Estimates and Range Estimates

Probability Distributions

Analyzing Modeling Results

Scenario Testing

Sensitivity Analysis

Module 2: Product Development, Operating Expenses, and the Time Value of Money (Chapters 5–8)

Chapter 5: New Products and Product Development

Factors That Affect New Product Development

New Product Risk

Product Mix

Level of Innovation

Speed to Market

Project Management and Control

Product Development Activities

Product Planning

Comprehensive Business Analysis

Chapter 6: Technical Product Design, Product Introduction, and Product Monitoring

Technical Product Design

Establishing a Financial Design

Components of the Financial Design

Testing a Product Design

Budgeting and Scheduling

Product Introduction

New Product Monitoring, Evaluation, and Feedback

Chapter 7: Incorporating Operating Expenses into Product Design

Describing Operating Expenses

Identifying Relevant Operating Costs

Gathering Expense Data

Establishing Expense Projections

Assigning Expenses to Products or Product Lines

Calculating Unit Costs

Assigning Direct and Indirect Costs

Costing Methods

Setting Margins for Risks and Profits

Risks in Operating Expenses

Setting Margins

Incorporating Operating Expense Charges into Product Designs

Explicit Expense Charges in Fixed Products

Explicit Expense Charges in Variable Products

Chapter 8: Time Value of Money Concepts

Basic Time Value of Money Concepts

Calculating Future Values

Calculating the Future Value of a Single Amount

Calculating the Future Value of a Single Amount

Calculating the Future Value of an Annuity

Calculating Present Values

Calculating the Present Value of a Single Amount

Calculating the Present Value of a Single Amount

Calculating the Present Value of an Annuity

Calculating the Present Value of a Stream of Unequal Payments

Module 3: Managing Cash Values, Accumulation Values, and Mortality Risks (Chapters 9–11)

Chapter 9: Cash Values and Accumulation Values

Insurance Company Investments

The General Account Portfolio

Separate Account Portfolios

Investment Growth

Rules-Based and Principles-Based Reserves

Investment Earnings and Cash Values

Calculating Cash Values

Policy Loan Benefits

Surrender Benefits

Nonforfeiture Benefits

Investment Earnings and Accumulation Values

Calculating Accumulation Values

Withdrawal and Surrender Benefits

Nonforfeiture Benefits

Chapter 10: Mortality Tables and Assumptions

Creating Mortality Assumptions

Calculate Experience Mortality Rates

Develop Basic Mortality Rates

Create a Curve of Expected Mortality

Adjust Expected Mortality

Interpreting a Mortality Table

Calculating the Mortality Rate

Calculating the Survival Rate

Types of Mortality Tables

Group-Specific Mortality Tables

Product-Differentiated Mortality Tables

Basic and Valuation Mortality Tables

Select and Ultimate Mortality Tables

Sex-Distinct and Unisex Mortality Tables

Published and Proprietary Mortality Tables

Modifying Tabular Mortality Rates

Projection Method

Setback Method

Setting a Mortality Charge in Product Design

Mortality Cost for Life Insurance

Mortality Cost for a Life Annuity

The Mortality Margin

Chapter 11: Managing Mortality Risk

Control Cycles

Product Design Controls

Underwriting and Underwriting Controls

Risk Classes

Risk Characteristics

Underwriting Controls

Distribution Channels and Prescreening

Reinsurance and Retention Limits

Module 4: Product Design for Life Insurance and Annuity Products (Chapters 12–13)

Chapter 12: Life Insurance Product Designs

Benefits in Life Insurance

Types of Premiums

Premiums for One-Year Term Life Insurance

Estimate of Future Death Benefits

Present Value of Future Death Benefits for 10,000 Policies

Cost of Death Benefits for One Policy

Premiums for Multiyear Term Life Insurance

Number of Death Benefits

Average Amount of a Death Benefit

Present Value of Future Death Benefits

Level Annual Premiums

Premiums for Whole Life Insurance

Universal Life Insurance

Deductions from UL Cash Values

UL Death Benefits

Setting the UL Mortality Charge

Projecting Premiums and Surrenders

Chapter 13: Annuity Product Designs

Annuity Death Benefits

Annuity Surrender or Withdrawal Benefits

Cost of Annuity Periodic Payments

Guaranteed Annuity Payout Options

Life Annuity Payout Options

Deferred Fixed Indexed Annuities

Deferred Variable Annuities

Variable Annuity Guarantee Riders

Guaranteed Minimum Death Benefit Riders

Living Benefit Riders

Module 5: Dynamic Modeling Applications and Profitability Measures (Chapters 14–15)

Chapter 14: Dynamic Applications in Product Modeling

Modeling Assumptions

Applications for Stochastic Modeling

Assumptions for Future Market Interest-Rate Movements

Increases in Market Interest Rates

Decreases in Market Interest Rates

Strategies for Managing Interest-Rate Risk

Assumptions for Future Policyholder Behavior

Modeling Applications for Policyholder Behavior

Free-Look Cancellation: No Assumption

Premium Deposits: A Fixed Assumption

Free Partial Withdrawals: A Fixed Assumption

Surrenders: A Dynamic Assumption

Risk Management for Complex Products

Chapter 15: Profitability Measures

Measuring Product Profitability

Net Present Value

Internal Rate of Return

Profit Margin

Measuring Enterprise Profitability

Profitability Ratios

Embedded Value

Glossary

Index

Course Format

Course Portals include the following elements:

  • PDFs of the assigned course materials that can be printed or read online
  • The same interactive Practice Questions and Sample Exams currently found in LOMA Test Preparation Guides (TPGs)
  • Recommended study plans to help learners set goals and manage their study schedule
  • A variety of additional media-oriented features designed to enhance the study and review process

Exam Format

The LOMA 371 exam has 60 questions and a time limit of 2 hours. It is available in I*STAR, Prometric and Paper exam formats.

Study Materials

Risk Management and Product Design for Insurance Companies, Second Edition (LOMA, 2012)
ISBN 978-1-57974-392-5

Test Preparation Guide for LOMA 371 (LOMA, 2012)
ISBN 978-1-57974-393-2

Optional printed textbook (not included in bundled fee)

Risk Management and Product Design for Insurance Companies, Second Edition (LOMA, 2012)
ISBN 978-1-57974-392-5
PBD Order # 371-10-12

About Bundled Study Materials

Some courses ("bundled courses") include study materials with your enrollment. A growing list of English-language courses include access to bundled study materials.

For some of these courses, once you enroll, you gain access to the study materials through your My Learning page in LOMANET. These include the Course Portal courses and the Need 2 Know courses.

How to Enroll

Enrolling for Exams and Bundled Courses

LOMA requires proctored examinations for many of its professional designation courses. Exams are administered in LOMA member organizations and in independent testing locations. This section provides information about exam formats, enrollment procedures for both exams and bundled courses, and exam fees.

LOMA exams vary in length from two–three hours. Consult your Test Preparation Guide (TPG) or see the Designation Study Materials Roadmap for specific information about the length of your exam. As new or revised LOMA courses are released, the number of examination questions for some course examinations may change. If you enroll for a bundled course delivered through a LOMA Course Portal, the assigned study materials are included in your enrollment and are accessible via the Course Portal. Your enrollment process will depend on the type of examination you choose to take:

LOMA offers two options for exam enrollment:

  • Online enrollment via LOMANET, our Internet-based education administration system
  • Enrollment forms for paper exams, for use by independent students only, can be found here.

I*STAR and Paper Exam Center Directories for testing at third-party locations

Retakes

Students who fail exams must pay full dates to retake the exams, in most cases. However, bundled courses (those courses that include exam fees and study materials) have a reduced rate to retake the exam. See LOMA’s Education & Training Catalog for fees.


See the LOMA 371 video

LOMA 371