IIQE Paper 5 Introduction to Investment-linked Long Term Insurance Policies question: traditional participating life policy

Answer: A. (i), (ii) and (iii)

Answer: (i), (ii) and (iii). Statements (i), (ii) and (iii) are true; (iv) is not.(i) True. Investment proceeds above what is needed to fund the guarantees are added to the company's earnings.(ii) True. Part of the earnings goes to participating policyholders as dividends.(iii) True. The remainder may be transferred wholly or partly to the shareholders' funds.(iv) False. Traditional policies have no units, and the insurer bears any deficit.Why not the others:• (i), (ii) and (iv): includes (iv), which is false, and leaves out (iii), which is true.• (i), (iii) and (iv): includes (iv), which is false, and leaves out (ii), which is true.• (ii), (iii) and (iv): includes (iv), which is false, and leaves out (i), which is true.Watch out: Assuming a traditional policyholder shares losses; the insurer bears a deficit.Rule: Traditional business: surplus goes to earnings, then to dividends and shareholders; a deficit falls on the insurer.Source: IA Investment-linked Long Term Insurance Examination Study Notes, 2024 Edition (7th ed., Nov 2024; for exams from 17 Feb 2025), 1.2, p. 1/2