Insurance study guide

All of the following are true regarding the Federal Sentencing Guidelines, EXCEPT:

They are mandatory.

Which one of the following is an example of a principles-based traffic control regulation?

Driver must maintain a reasonable following distance appropriate to speed and conditions.

Which one of the following standards was developed in response to the financial crisis that began in 2007?

Basel III

Which one of the following statements is true regarding Basel III?

Basel III was developed to address both the risk of individual organizations and systemic risk in the banking sector.

The Chief Compliance Officer's responsibilities include all of the following, EXCEPT:

Being the legal expert on employment laws.

The Federal Sentencing Guidelines require a senior manager to have responsibility for the organization's entire compliance program. The individual selected is typically from which one of the following functions of the organization? Internal audit Operations Incorrect answer: Legal Human development

Correct Answer: Internal audit

Solvency II is a new regulatory standard in the European Union (EU) to establish principles for risk management and consistency in regulation for which one of the following industries?

Insurance

Solvency II is a regulatory standard that should reduce the likelihood of insolvency, market disruption, and consumer loss in which one of the following industries?

Insurance

There are four major objectives of a compliance program. Which one of the following would not be considered an objective?

Notifying the United States Sentencing Commission of all reported incidents.

One of the key department players in compliance program implementation is Internal Audit. As such, the main responsibility of Internal Audit involves which of the following?

Oversight of financial compliance

When comparing principles-based regulation with rules-based regulation, which one of the following statements is correct?

Principles-based regulation responds more quickly to a changing environment.

Which one of the following is an example of a compliance requirement that is internal and mandatory?

Requiring all employees working in the foundry to wear hearing protection.

Examples of Principles-Based Regulations include all of the following, EXCEPT: Investors having material influence over the management of a publicly traded company must publicly disclose that control to all stakeholders in the firm. , Not Selected Insurance companies must retain sufficient capital to ensure that policyholder obligations are met. , Not Selected Corporations must fairly and accurately report on the financial condition of the firm to all stakeholders. , Not Selected Correct answer: Restaurant employees must wash their hands every time they use the restroom.

Restaurant employees must wash their hands every time they use the restroom.

Be-Ne-Lux Insurance is an insurer operating in Belgium, the Netherlands, and Luxembourg. Be-Ne-Lux is subject to the Solvency II standards. Company managers believed the company was adequately financed, however it was determined that the company did not have adequate assets based on the uncertainty of its operating performance. The standard that Be-Ne-Lux failed to meet is

Risk-based capital

Which one of the following regulatory approaches allocates resources based on the concept of achieving the greatest potential good while simultaneously minimizing the overall costs?

Risk-based regulation

Which one of the following regulatory approaches provides an organization with more certainty and greater predictability? Rules-based Evidence-based Principles-based Risk-based

Rules-based

The individual responsible for ensuring compliance within an organization usually reports to which one of the following?

Senior management

Bo's Diving Adventures (BDA) is one of the largest recreational SCUBA diving businesses in the world. While enjoying much success in the diving aspect of its business, it has had its challenges adhering to the different government and industry regulations over the years. The board of directors decided to hire a Chief Compliance Officer (CCO) to remedy this issue and ensure that each diving excursion the company charts is in full compliance with all regulations regardless of destination. After a week on the job the new CCO has discovered that the number one non-compliance issue over the past few years could be rectified with better internal training. As such, the BEST move the CCO should make would be which of the following?

Sit down with the head of Human Resources and outline a comprehensive training program for all employees which address the non-compliance issues.

Tom is the Chief Underwriting Officer (CUO) of a large commercial insurance carrier and has been tasked with updating the current compliance program. The internal audit results for the past few years have been poor and highlight a need for immediate correction in certain functional areas. Instead of modifying the current program, Tom decides to start from scratch and build a new, ground-up program. What is a fundamental component Tom should be implementing to ensure his company's compliance program is effective?

Use due diligence to prevent and detect criminal behavior.

The Sarbanes-Oxley Compliance (SOX) category involves all of the following compliance levels, EXCEPT:

Voluntary