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AFE SOFE Accredited Financial Examiner Free Practice Exam Questions (2025 Updated)

Prepare effectively for your SOFE AFE Accredited Financial Examiner certification with our extensive collection of free, high-quality practice questions. Each question is designed to mirror the actual exam format and objectives, complete with comprehensive answers and detailed explanations. Our materials are regularly updated for 2025, ensuring you have the most current resources to build confidence and succeed on your first attempt.

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Total 286 questions

The value of the capital stock shown in the stock life insurance company’s statutory basis balance sheet equals the par value per share multiplied by the number of issued shares. In the case of no-par stock:

A.

The stated value per share is used (or liquidation value, for no-par preferred capital stock)

B.

The Total value of shares is used (or liquidation value, for par preferred capital stock)

C.

The market value per share is used (or liquidation value, for no-par preferred capital stock)

D.

Capital stock may be sold to the public for an amount greater than par or stated value

The method used to account for insurance and reinsurance contracts that do not transfer insurance risk is referred to as:

A.

Accounted revenue

B.

Premium deficiency

C.

Retained balance

D.

Deposit accounting

Which risk assessment procedures are used to obtain an understanding of the entity and its environment, including its internal control?

A.

Inquiries of management

B.

Analytical procedures

C.

Observation

D.

All of the above

Reinsurance is defines as:

A.

to pay another party to assume a stream of contingent expenses, for a premium over the expected cost

B.

to pay another party to assume a stream of contingent revenues, for an interest over the expected cost

C.

to sell another party to assume a stream of contingent assets, for a premium over the actual cost

D.

to sell another party to assume a stream of contingent expenses, for a discount over the expected cost

The subsequent measurement of the deposits is based upon whether the insurance and reinsurance contract:

A.

transfer only significant timing risk

B.

transfer only significant underwriting risk

C.

transfer neither significant timing nor underwriting risk

D.

All of the above

Liabilities are recognized for known claims when sufficient information has been developed to indicate the involvement of a specific insurance policy.

A.

True

B.

False

The combined ratio is the sum of it:

A.

loss ratio

B.

expense ratio

C.

dividend ratio

D.

All of the above

Direct serving loans method requires a system of good internal control and requires that the functions be split between the Accounting Department and the Investment Department. The Investment Department is responsible for promptly supplying the Accounting Department with:

A.

Accounting data on new loans

B.

Resolving few exceptions reported to it by the Accounting Department, i.e., when a borrower defaults on a loan payment

C.

Data related to changes in existing loans, which affects the accounting function

D.

Alerting the Investment Department promptly whenever an exception to the normal processing routine occurs

The two most common types of dollar rolls are:

A.

Fixed-coupon and yield-maintenance agreements

B.

Variable-coupon and yield-maintenance agreements

C.

Fixed-coupon and Accounting agreements

D.

Variable -coupon and Principal agreements

The difference between the case-basis reserves and the estimated ultimate cost of such recorded claims is known as:

A.

projected reserves

B.

computing reserves

C.

case-development reserves

D.

claim reserves

The ten largest companies account for what percent of life insurance sales in Canada?

A.

less than 50 percent

B.

more than 65 percent

C.

more than 75 percent

D.

less than 80 percent

Short-duration contracts provide insurance protection for fixed period and can cancel the contract at the end of any contract period.

A.

True

B.

False

A mortgage servicer performs all of the servicing functions. The servicer remits all funds received on the serviced loans to the company on a monthly or other periodic basis and usually reports all transactions, including foreclosures and transactions related to foreclosed property. The contract between the company and servicer should provide that the:

A.

Company can periodically audit the servicer’s records and files pertaining to the loans owned by the company. In lieu of making the audit, the company can agree to receive an annual audit report pertaining to its loans from the servicer’s independent certified public accountants. This is the single audit concept

B.

Servicer should not have a fidelity bond and an errors and omission policy of stipulated minimum amounts

C.

Servicer must have a fidelity bond and an errors and omission policy of stipulated minimum amounts

D.

Servicer must have an annual independent audit, with a copy of the audited financial statements sent to the company within a certain period of time after the end of the servicer’s fiscal year

Which of the following is NOT included when initial acquisition of Subsidiary, Controlled and Affiliated Entities (SCA) is recorded as the sum of?

A.

any cash payment

B.

the fair value of other assets distributed

C.

the fair value of any expenses

D.

any direct costs of the acquisition

Accounting transactions that occur after the initial investment in a loan and during the period the loan is being serviced fall into two broad categories. Which one of the following is out of those categories?

A.

Processing transactions, which are recurring and similar in nature for all mortgage loans,

B.

processing transactions, which are not recurring and opposite in nature for all mortgage loans

C.

Unusual transactions

D.

None of these

The Module Rule requires the insurer to provide:

A.

to the insurance commissioner of the state of domicile, a copy of notification of adverse financial condition

B.

to the auditor, evidence that the notification has been provided to the organization

C.

Both A & B

D.

Neither A nor B

What may leave more risk than a company should prudently assume due to the risk exacerbating features of a particular product?

A.

Feasible investment strategy

B.

Design strategy

C.

Risk strategy

D.

Product risk strategy

____________ is considered to be self-sustaining if it is financially and operationally independent of the reporting enterprise.

A.

Retrocession

B.

Reinsurance

C.

Portfolio Investments

D.

Foreign operation

Schedule rating:

A.

starts with a real standard, frequently the judgmental rate, and adjusts such standard rates according to an evaluation of greater or lesser exposure to risk.

B.

starts with an assumed standard, frequently the manual rate, and adjusts such standard rates according to an evaluation of greater or lesser exposure to risk.

C.

starts with an assumed standard, frequently the class rate, and adjusts such standard rates according to an evaluation of greater or lesser exposure to risk.

D.

starts with a real standard, frequently the individual rate, and adjusts such standard rates according to an evaluation of greater or lesser exposure to risk.

A basic premise underlying the application of is that it is reasonable to assume that plausible relationships among data exist and continue in the absence of known conditions to the contrary.

A.

Independent estimates

B.

Statistical claims

C.

Analytical procedures

D.

None of the above

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Total 286 questions
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