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IIQE papers (insurance)

Paper 1Principles and Practice of Insurance✓Paper 3Long Term Insurance Paper 5Investment-linked Long Term Insurance

MPF intermediaries

MPFMPF Intermediaries Examination

IIQE Paper 5 Investments question: risk management tool

IIQE Paper 5Investments

An intermediary fails, and its clients are paid out of the investor compensation scheme. As a risk management tool, this scheme is a:

A remedial tool
B diagnostic tool
C monitoring tool
D preventative tool

Show the answer and explanation

Answer: A. remedial tool

Answer: remedial tool. The investor compensation scheme responds after an intermediary has failed and caused loss, which makes it a remedial tool.Why not the others:• diagnostic tool: Diagnostic tools identify and assess risks before they materialise.• monitoring tool: Monitoring tools track risks already identified, such as surveillance and reviews.• preventative tool: Preventative tools stop or limit risks in advance; compensation comes after the loss.Watch out: Treating compensation as preventative; it is paid after the loss, so it is remedial.Rule: Remedial tools respond to risks that have arisen: disciplinary sanctions and the investor compensation scheme.Source: IA Investment-linked Long Term Insurance Examination Study Notes, 2024 Edition (7th ed., Nov 2024; for exams from 17 Feb 2025), 2.1.6(a), p. 2/10

Common mistake

Treating compensation as preventative; it is paid after the loss, so it is remedial.

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Original study material written to the public IIQE Paper 5 syllabus. Independent, not endorsed by the Insurance Authority or the VTC. Verify figures and rules against current guidance before relying on them.