LOMA 291 Module 1 Exam with Correct Answers Updated
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Course
LOMA 291
Institution
LOMA 291
LOMA 291 Module 1 Exam with Correct Answers Updated
Regulators and rating agencies expect an insurer to have an ERM program - Answer-When evaluating a company, they review
The quality and effectiveness of the company's ERM program
The risks the company faces
Its strategies for managing risks
...
LOMA 291 Module 1 Exam
with Correct Answers
Updated
Regulators and rating agencies expect an insurer to have an ERM program - Answer-
When evaluating a company, they review
The quality and effectiveness of the company's ERM program
The risks the company faces
Its strategies for managing risks
The following statements pertain to enterprise risk management in a typical financial
services company. Select each correct statement.
a. ERM targets not only risks that threaten a company's viability but also those that have
the potential to enhance profitability.
b. ERM provides risk information to internal parties but not external stakeholders.
c. Currently, rating agencies expect insurers to have an effective ERM program in place.
d. Some companies have an ERM department. - Answer-A, C, & D - ERM provides
information for both internal and external parties. The other statements are correct.
three lines of defense - Answer-A risk management model structured in three parts: (1)
operational management, (2) internal monitoring and oversight functions, and (3)
internal audits.
First line: Operational Management - Answer-The first line of defense, or the frontline, is
operational management.
Operational managers are responsible for identifying risks as they arise and taking
appropriate steps to minimize the effect of those risks.
In turn, managers train employees to identify and manage risks appropriately. For
example, all employees may receive training to deal with potential cybersecurity risks
such as viruses, but underwriters may receive specific training to recognize the signs of
a potentially fraudulent application.
The first line of defense is a real team effort: we're all on the frontline together.
Second line: Internal Monitoring and Oversight - Answer-The second line of defense—
internal monitoring and oversight—looks for signs of risks that might not be obvious on
the frontlines.
,A company's risk committee and compliance function are both key players in the second
line of defense.
Internal monitoring double-checks risk management to make sure things are going well.
The oversight function owns aspects of the risk management process and helps set risk
policy. For example, the risk committee may develop policies for data backups and
restoration of email function in the event of a catastrophic event striking the home office.
Think of the second line of defense as risk specialists. Risk is our business.
Third Line: Internal Audit - Answer-The third line of defense, the internal audit,
determines if the first two lines of defense have been performing to expectations.
Internal audits systematically examine the company's risk management to determine
what is working and what could be improved.
Internal audits are different from the other two lines of defense in two important ways:
Objectivity. An audit measures facts and evidence only. It doesn't weigh risk against
potential reward—it only reports results.
Organizational independence. An auditor reports only to the highest level of
management. This helps keep the audit unbiased.
The third line of defense gives us the facts we need to be sure that risk management is
working as intended.
In the three lines of defense risk management model, a product line manager and her
employees are on the
a. first line of defense
b. second line of defense
c. third line of defense - Answer-A. - Operational managers and the employees who
report to them are on the frontline, or first line of defense.
In the three lines of defense risk management model, members of a company's risk
committee are on the
a. first line of defense
b. second line of defense
c. third line of defense - Answer-B. - The risk committee is part of internal monitoring
and oversight, which make up the second line of defense.
Stakeholders (consituents) - Answer-A party that has an interest in how a company
conducts its business. Also known as a constituent.
Dividend - Answer-Compensation that a company may pay to owners upon a vote by
the company's board of directors.
Stockholder - Answer-We stockholders expect the company to grow steadily. We expect
to earn a reasonable return, sometimes in the form of dividends. Do you know what a
, dividend is? Sometimes the board of directors votes to make a payment to the
stockholders. The payment is called a dividend.
Policy owner - Answer-Here are some factors I considered when I chose to buy a policy
from Forthright:
Good company reputation
Policy features
Reasonable charges
Financial strength
Customer service
Forthright provides my personal safety net because of their good reputation and policy
features. They charge me for reasonable expenses and they have the financial strength
to be around for the long haul to pay the policy benefits they promise me and my family.
So far, I'm pleased with my policy and the company's customer service.
financial professional - Answer-In insurance sales, any individual—including agents,
bank-affiliated sales personnel, and brokers—who is licensed to sell insurance
products, solicit sales, or negotiate insurance contracts.
Why do I place business with Forthright? Here are some reasons:
Forthright's products meet my clients' needs.
Forthright offers competitive compensation on the business I sell.
Its staff is top notch and provides fast and accurate support.
The company has good ratings, so I trust its ability to meet policy obligations in the
future.
employee values - Answer-I value the long-term employment.
I enjoy my coworkers.
I'm proud to work for a reputable company.
I appreciate the salary and benefits.
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