CLU exam 1 CH 20 with Complete Solutions 2023

The claims-paying ability ratings that the three principal multi-industry rating services give to life insurance companies represent an assessment of a company's ability to meet its obligations to all of its policyowners. [1] - Correct Answer-True Although the three principal multi-industry rating services have very different claimspaying ability rating definitions, they virtually always assign the same rating to a particular life insurance company. [1] - Correct Answer-False When a life insurance company is placed on a rating service's watch list, it signals that the company is in danger of insolvency. [1] - Correct Answer-False When a life insurance company is placed on a rating service's watch list, it indicates that there has been a material change in the company's circumstances that the rating agency has not had the opportunity to evaluate fully or that there are expected future events that could have a significant effect on the company's position. This could involve positive, negative, or developing expectations. In addition to reviewing a company's statutory and GAAP financial statements, all four of the principal rating services require a visit with the company's senior officials each year to gather information used in the rating process. [1] - Correct Answer-False A.M. Best does not require a visit with the company's senior officials each year to gather information used in the rating process. A.M. Best does not require a visit with the company's senior officials each year to gather information used in the rating process. - Correct Answer-True Elements that measure a company's current financial position include capital, liquidity, and asset/liability values. [1] - Correct Answer-True To determine whether a life insurance company is in a good liquidity position, a rating service looks at the amount of the company's cash and short-term investments and the likelihood of sudden cash calls. [1] - Correct Answer-True In assessing a company's capabilities to f