difference between EVENT and Adverse assumption
I am confused about the "event leading to the scenario" and "adverse assumption", which appears in 2017F Q23.
1. I assume "adverse assumption" is equivalent to "adverse scenario" is that correct?
2. In the solution of 2017F Q23(b) sample 1, "Significant increase in premium volume" is the answer to question "adverse assumption". The examiner's report also lists "Identifying the premium volume increase or decrease as the event" as a common mistake.
2016Q21 (b) asks to describe an event which can lead to the results shown in the adverse scenario. Sample answers is "Increase in premium volume".
The solution in the above 2 questions contradicts each other. Can you help me understand the difference between event and adverse assumption? Thanks!
Comments
So there's a slight nuance to this question here and what I think the CAS is trying to say/
2017F Q23: The event is something which causes the premium volume to increase. For example, rapidly growing the business (i) causes the premium volume to increase (ii). Event causes assumption.
Scenario is definitely =/= assumptions. You come up with an event, and then make assumptions based on what you think will happen in the event.
Having said that, you are right in that there is some inconsistency with 2016. The CAS are not known for consistency and they do not fix past year questions when they realize there was an inconsistency vs past sittings. I would just remember event causes assumption