IIQE Paper 1 Principles and Practice of Insurance Examination Quiz 10 Advanced

The principle of proximate cause determines whether a loss is covered under an insurance policy. Even if the direct cause of a loss is not an insured peril, the loss might still be recoverable if it’s part of an unbroken chain of events originating from an insured peril. This is illustrated by the marine cargo example where negligence led to a collision, then fire, explosion, and finally water damage. The water damage was recoverable under policies covering entry of water, despite the initial negligence. However, policy wordings can modify this principle. Terms like ‘directly or indirectly’ can broaden exclusions, and specific clauses can exclude losses due to delay, even if the delay was caused by an insured peril. Indemnity, meaning exact financial compensation, applies to insurance types where losses can be precisely measured, such as property insurance, but not typically to life or personal accident insurance where losses are not easily quantifiable. Medical expenses insurance is an exception and can be indemnity-based.

Statement I is correct. According to the Personal Data (Privacy) Ordinance, a data user must comply with a data subject’s request to cease using their personal data for direct marketing at any time.

Statement II is correct. The Ordinance mandates that a data user must comply with a data subject’s request to stop providing their personal data to others for direct marketing purposes and notify those recipients to cease using the data.

Statement III is incorrect. The maximum penalty for contraventions involving the provision of personal data for gain is a fine of HK$1,000,000 and imprisonment for 5 years. The statement incorrectly states HK$500,000 and 3 years.

Statement IV is incorrect. The maximum penalty for disclosing personal data obtained without the data user’s consent, with intent to cause psychological harm, is a fine of HK$1,000,000 and imprisonment for 5 years, not HK$500,000 and 3 years.

Therefore, statements I and II are correct.

Licensed insurance broker companies in Hong Kong are subject to specific requirements regarding financial record-keeping and reporting, as outlined in the Insurance Ordinance (IO) and related rules. These requirements aim to ensure transparency and accountability in their operations.

Firstly, a licensed insurance broker company must maintain all records in writing, either in Chinese or English, or in a manner that allows for easy conversion into written form in either language. This ensures that records are accessible and understandable for regulatory and auditing purposes.

Secondly, these records must be retained for a minimum period of 7 years. This retention period allows the Insurance Authority (IA) sufficient time to conduct audits and investigations, and ensures that historical financial data is available for analysis.

Thirdly, the financial statements submitted to the IA under section 73(1) of the IO must be prepared in accordance with applicable accounting standards. These financial statements must include specific information, such as insurance brokerage income (distinguishing between general and long-term business), aggregate balances of cash held in client accounts, and insurance premiums payable. The requirement to distinguish between general and long-term business income provides a clearer picture of the company’s revenue streams.

Fourthly, any document submitted under section 73(1), except for the auditor’s report, must be approved by the company’s directors. The document must be signed by two directors or, if the company has only one director, by that director. This requirement ensures that the directors are aware of and accountable for the information being submitted to the IA.

Fifthly, the auditor’s report on the financial statements must include statements indicating whether the financial statements present a true and fair view of the company’s financial position and performance. The auditor must also state whether the company has complied with the rules and relevant provisions of the IO regarding capital, net assets, professional indemnity insurance (PII), client accounts, and proper books and accounts. The auditor must assess compliance as of the end of the financial year and at least two other dates during the year, with a minimum intervening period of three months between those dates. This ensures ongoing compliance monitoring throughout the financial year.

Therefore, all the statements are correct.

Statement I is correct. An automatic reinstatement clause in a liability policy allows the policy’s aggregate limit to be restored after a claim is paid, up to a pre-agreed number of reinstatements. This is a standard feature designed to provide ongoing coverage. Statement II is incorrect. ‘Average’ in non-marine insurance refers to a policy provision that penalizes under-insurance when a claim arises, not a partial loss. Partial losses are simply partial losses. Statement III is correct. A bailee is someone who takes possession of goods with the owner’s consent but without the intention of transferring ownership. This is a fundamental concept in property law and insurance. Statement IV is incorrect. The Code of Conduct for Insurers in Hong Kong applies only to personal policyholders resident in Hong Kong and for policies effected in their private capacity. It does not apply to commercial insurance policies.

This question explores the concept of subrogation and how proceeds are shared between the insurer and the insured, particularly when the insurer has provided less than a full indemnity due to policy limitations.

(1) Excess: When the insured is responsible for an initial loss amount (excess), and a subsequent recovery is made from a third party, the insurer is typically entitled to the recovery up to the amount they paid out. If the recovery exceeds the insurer’s payment, the insured may be entitled to the remaining amount, compensating them for their initial loss.

(2) Limit of Liability: If an insured’s policy has a limit of liability and they incur a loss exceeding that limit, any recovery from a third party will first go to the insured to cover their out-of-pocket expenses beyond the policy limit. Once the insured is fully compensated, any remaining recovery goes to the insurer, up to the amount of their initial payment.

(3) Average: In cases of underinsurance, where the insured only covers a percentage of the risk, they are entitled to a corresponding percentage of any subrogation proceeds, as if they were a co-insurer for the uncovered portion of the risk.

Therefore, all three statements accurately describe scenarios for sharing subrogation proceeds. Statements I, II, and III are correct.

Statement I is correct. Reinsurance is a common practice where insurers transfer a portion of their risk to other insurers or reinsurers.
Statement II is incorrect. Inward reinsurance refers to situations where an insurer accepts risks from other insurers, acting as a reinsurer for those risks.
Statement III is incorrect. The Insurance Ordinance does not explicitly define or regulate ‘Professional Reinsurers’ as a distinct legal category. While some insurers specialize in reinsurance, they are still subject to the same regulatory framework as other authorized insurers.
Statement IV is incorrect. The Insurance Authority is the primary regulatory body overseeing the insurance industry in Hong Kong, as established under the Insurance Ordinance. The Hong Kong Monetary Authority (HKMA) primarily regulates banking and financial institutions, not insurance companies.

The equitable doctrine of contribution arises when an insured has multiple insurance policies covering the same interest, peril, subject matter, and loss, and each policy provides indemnity. All policies must be liable for the loss, meaning no exclusions prevent contribution. The policies must cover the same interest; for example, a merchant’s policy covers their ‘interest as owner,’ while a warehouse operator’s policy covers their ‘interest as bailee.’ These are different interests, so contribution does not apply. Life insurance policies are generally not subject to indemnity, so contribution does not apply. A Rateable Proportion Clause restricts an insurer’s liability to its rateable share of the loss.

Statement I is correct: Contribution is indeed a claims-related doctrine of equity that applies in double insurance scenarios where multiple policies cover the same interest and the total insured amount exceeds the legally allowed indemnity.

Statement II is incorrect: Contribution applies when policies cover the same interest. The example illustrates a situation where policies cover different interests (owner vs. bailee), thus contribution does not apply.

Statement III is correct: A Rateable Proportion Clause modifies the doctrine of contribution by restricting an insurer’s liability to its share of the loss, preventing the insured from claiming the full loss from one insurer alone.

Therefore, statements I and III are correct.

The Insurance Ordinance and Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) require insurers to implement robust systems to combat financial crime. This includes appointing a Money Laundering Reporting Officer (MLRO), establishing clear procedures for internal and external reporting of suspicious transactions, and maintaining comprehensive records. Staff training is also crucial to ensure employees can identify and report potential money laundering or terrorist financing activities.

Statement I is correct because insurers are indeed required to appoint an MLRO to oversee AML/CFT compliance.

Statement II is correct because insurers must establish clear policies and procedures for reporting suspicious transactions to the Joint Financial Intelligence Unit (JFIU) and managing risks associated with such transactions.

Statement III is correct because insurers are obligated to maintain proper records of internal reports and Suspicious Transaction Reports (STRs) to facilitate audits and investigations.

Therefore, statements I, II, and III are correct.

According to Guidance Note 24 (GL24) issued by the Insurance Authority (IA), a ‘principal’ has specific meanings depending on the type of licensed individual. For a licensed individual insurance agent, the principal is the authorized insurer that appoints them. For a licensed technical representative (agent), the principal is the licensed insurance agency that makes the appointment. Lastly, for a licensed technical representative (broker), the principal is the licensed insurance broker company responsible for the appointment. Understanding these definitions is crucial for determining the responsibilities and relationships within the insurance industry as regulated by the IA.

The Insurance Ordinance outlines specific restrictions to prevent conflicts of interest and ensure proper oversight within the insurance industry. These restrictions apply to individuals associated with licensed insurance agencies and broker companies. Let’s analyze each statement:

Statement I: This statement is correct. A director of a licensed insurance agency who manages regulated activities cannot simultaneously be a licensed technical representative (broker).

Statement II: This statement is also correct. A licensed technical representative (agent) is prohibited from being a licensed technical representative (agent) for another licensed insurance agency. This prevents an individual from representing multiple agencies, which could lead to conflicts of interest or inadequate service.

Statement III: This statement is incorrect. While controllers of firms must be ‘fit and proper’, the threshold for control regarding partnerships and companies is set at 15% of capital, profits, or voting rights, not 10%.

Therefore, statements I and II are correct.

A contract is fundamentally a legally enforceable agreement, forming the bedrock of commercial and personal interactions. Simple contracts, prevalent in insurance, can be formed verbally, in writing, or even inferred from conduct, without needing special formalities. Contracts by deed, requiring a signed, sealed, and delivered written instrument, are reserved for specific transactions like land transfers and suretyship. The essential elements of a valid simple contract must be present during its formation; absence of any element renders the contract void or defective. Void contracts have no legal effect from the outset, while voidable contracts remain effective unless an aggrieved party chooses to treat them as void. Understanding these distinctions is crucial in insurance, where contracts define the rights and obligations of insurers and insured parties.

Statement I is correct. According to the guidelines for licensed insurance brokers, they should not mislead or deceive clients and must ensure the accuracy of information provided about insurers, intermediaries, or insurance products.

Statement II is correct. Licensed insurance brokers are prohibited from making inaccurate, misleading, or deceptive statements or comparisons to induce a client to enter into an insurance policy or replace an existing one.

Statement III is incorrect. While licensed insurance broker companies should ensure their advertising and marketing materials are accurate and not misleading, the prohibition on disparaging materials applies to *other* brokers or insurers, not generally.

Statement IV is incorrect. A licensed technical representative (broker) must only use advertising or marketing materials supplied or approved by its appointing licensed insurance broker company. This statement is correct, but the question asks for exceptions, making the statement incorrect in the context of the question.

Therefore, statements I and II are correct.

An unenforceable contract is not void but cannot be enforced in court until a required action is completed. Examples include unpaid stamp duty on a land lease or a missing marine insurance policy. The defect can be remedied, making the contract enforceable.

Statement I is correct because an unenforceable contract can become enforceable once the required action, such as issuing a marine policy, is completed.

Statement II is incorrect because an unenforceable contract is not the same as a void contract. A void contract is invalid from the beginning, while an unenforceable contract is initially valid but cannot be enforced until a specific action is taken.

Statement III is correct because the lack of stamp duty payment on a lease agreement renders the contract unenforceable until the duty is paid.

Therefore, statements I and III are correct.

Statement I is correct. Charging higher premiums to women solely based on gender stereotypes related to driving ability constitutes unfair discrimination, as highlighted in the IIQE Paper 1 materials.

Statement II is incorrect. The Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405) and the Organized and Serious Crimes Ordinance (Cap. 455) criminalize dealing with property known or reasonably believed to represent proceeds of indictable offenses or drug trafficking. This is related to money laundering, not terrorist financing.

Statement III is correct. Proliferation financing involves providing funds or financial services for the manufacture, acquisition, or use of nuclear, chemical, or biological weapons, as defined in the IIQE Paper 1 materials.

Statement IV is incorrect. Placement is the initial stage of money laundering where illegal cash is introduced into the financial system. Layering involves complex transactions to disguise the source of the money, and integration is the stage where the money appears legitimate. Therefore, placement is not about creating complex layers.

Therefore, statements I and III are correct.

According to the Insurance Authority’s guidelines for licensed insurance brokers, several key disclosures and practices are mandated to ensure transparency and protect client interests.

Firstly, a licensed insurance broker must provide specific information to the client, including their license type (insurance broker company license or technical representative license), and if applicable, the name of the appointing licensed insurance broker company. This disclosure must also state that the broker acts on behalf of the client when dealing with insurers. This information should be provided before commencing any regulated activity or as soon as reasonably practicable afterward.

Secondly, if a licensed technical representative (broker) represents multiple licensed insurance broker companies, they must clearly identify to the client which company they are representing for each specific insurance transaction.

Thirdly, a licensed technical representative (broker)’s business card must accurately display their name as it appears on their Hong Kong identity card or passport, their license number, the type of license they hold, and the name of their appointing licensed insurance broker company.

Finally, when recommending or arranging insurance products, a licensed insurance broker must provide all relevant information on the key features of each product. This includes the insurer’s name, major policy terms and conditions, the premium level and payment period, and any fees or charges payable by the client. When comparing insurance products, the broker must adequately explain the similarities and differences between the products in an accurate and non-misleading manner.

If the broker intends to give regulated advice on or arrange an insurance policy with an insurer which is not authorized by the IA, the broker should disclose to the client the name and address of the insurer, the fact that the insurer is not regulated by the IA and is subject to different laws and regulations, the financial standing of the insurer, and the governing law of the insurance policy and the jurisdiction in which disputes under the policy will be determined. Where the client is an individual, the licensed insurance broker should also obtain written acknowledgement from the client of the disclosures.

Statement I is correct. An assignment of an insurance contract transfers the assignor’s rights to the assignee, meaning the insurer is obligated to pay the assignee for losses occurring after the assignment, not the assignor. This aligns with the principles of assignment as outlined in the IIQE Paper 1 syllabus.

Statement II is incorrect. With the assignment of the right to insurance monies, the assigned policy remains to cover losses suffered by the assignor, not the assignee. The assignee simply has the right to sue the insurer to recover under the policy.

Statement III is correct. As per the IIQE Paper 1 syllabus, for an assignment of the insurance contract to be valid, both the assignor and the assignee need to have insurable interest in the subject matter of insurance at the time of assignment.

Statement IV is incorrect. According to the IIQE Paper 1 syllabus, an assignment of the right to insurance monies does not require the insurer’s consent, regardless of the insurance contract’s nature. However, assignment of the insurance contract may require consent, depending on the type of policy.

Therefore, statements I and III are correct.

Statement I is correct. Customer service departments handle various inquiries, some unrelated to the company’s business, requiring perception and tact.
Statement II is incorrect. While customer service contributes to public relations, the more formal aspects, such as coordinating external communications and media inquiries, typically fall under the marketing department’s responsibilities.
Statement III is correct. Customer service often handles initial requests for documentation like duplicate policies and amendments.
Statement IV is correct. Handling complaints fairly and promptly is a crucial function of customer service, potentially involving liaison with other departments and higher management levels.
Therefore, statements I, III, and IV are correct.

According to the Personal Data (Privacy) Ordinance, insurance practitioners must collect personal data through lawful and fair means. Copying customer data from a former employer for use at a new company is a breach of this principle. Using personal data for a new purpose without consent, such as marketing different products, also violates the ordinance. Furthermore, insurance institutions must implement security measures to protect customer data during transmission and when handled outside the workplace. This includes using sealed envelopes for sensitive documents and providing clear guidelines for agents working remotely. The Sex Discrimination Ordinance, Disability Discrimination Ordinance, and Family Status Discrimination Ordinance aim to eliminate discrimination based on sex, marital status, pregnancy, disability, and family status. While insurers can differentiate based on actuarial data (e.g., life expectancy), such differentiation must be reasonable and based on reliable data. The Race Discrimination Ordinance prohibits discrimination based on race.

Statement I is correct. Insurers are expected to issue claim forms promptly and without any charges to the policyholder. This ensures accessibility and ease of initiating a claim.

Statement II is correct. If a claim cannot be admitted, the insurer should provide a reasonable explanation to the claimant. This promotes transparency and helps the claimant understand the reasons for the denial.

Statement III is incorrect. The Insurance Complaints Bureau (ICB) handles disputes between insurers and individual policyholders related to personal insurance contracts. However, the ICB does *not* have jurisdiction over insurance intermediaries’ misconduct.

Statement IV is incorrect. The Insurance Claims Complaints Panel consists of four members. Two members are from the insurance industry, and two are from outside the insurance industry. The panel is led by an independent Chairman appointed by the ICB with the prior consent of the Secretary for Financial Services and the Treasury.

Therefore, statements I and II are correct.

In insurance, ‘assignment’ refers to the transfer of rights. There are two main types: assignment of the insurance contract and assignment of the right to insurance monies. When an insurance contract is assigned, the original policyholder’s interest passes to the new policyholder. If a loss occurs after the assignment, the insurer pays the assignee for *their* loss, not the assignor’s. A life insurance policy assignment does not change the life insured. When the right to insurance money is assigned, the policy covers losses suffered by the assignor, but the assignee has the right to claim from the insurer. For an insurance contract assignment to be valid, both parties must have insurable interest at the time of assignment. However, for assignment of the right to insurance money, the assignee doesn’t need insurable interest. Insurer consent is generally not required for assignment of the right to insurance money. Life and marine cargo policies can be assigned without the insurer’s consent. Assignment only transfers rights, not obligations, unless the insurer consents to the transfer of obligations.

The Insurance Ordinance (IO), formerly known as the Insurance Companies Ordinance (Cap. 41), serves as the primary legislation governing the insurance industry in Hong Kong. It establishes the regulatory framework for insurers, intermediaries, and other relevant parties. Understanding the scope and purpose of the IO is crucial for anyone involved in the insurance sector in Hong Kong. The IO defines the two major divisions of insurance as Long Term Business and General Business. Long Term Business mainly concerns life insurance contracts, while General Business encompasses other types of insurance such as property, liability, and accident insurance. The IO empowers the Insurance Authority (IA) to supervise and regulate the insurance industry, ensuring its stability and protecting policyholders’ interests. The IA has the authority to issue licenses, conduct inspections, and enforce compliance with the IO and other relevant regulations. Lloyd’s of London, a major player in the global insurance market, also participates in the Hong Kong market, operating within the regulatory framework established by the IO.

Life and personal accident insurance are typically considered benefit policies, not indemnity policies. This is because it’s impossible to precisely quantify the financial value of a human life or the impact of an injury. Therefore, these policies pay out a predetermined benefit amount as specified in the policy document.

Insurable interest is a crucial concept, representing the financial stake one has in the subject matter of insurance. While property insurance aims to indemnify the policyholder for their financial loss, life and personal accident insurance often involve an unlimited insurable interest. This means the benefit payable isn’t strictly tied to a provable financial loss in the same way as property insurance.

When settling property insurance claims, insurers often have several options: cash payment, repair, replacement, or reinstatement. Cash payment is straightforward. Repair involves paying a repairer directly. Replacement provides a new item, especially for items with little depreciation. Reinstatement restores the property to its pre-loss condition. Salvage refers to the remaining value of damaged property after a loss. This value is considered when calculating the indemnity, either by deducting it from the payout to the insured or by the insurer disposing of the salvage and retaining the proceeds.

Abandonment, primarily used in marine insurance, involves the insured surrendering the insured property to the insurer in exchange for a total loss payment. Property insurance policies usually exclude abandonment.

Policy provisions can limit the indemnity provided. Average clauses reduce the payout if the property is underinsured. Policy excesses or deductibles require the insured to bear a specified amount of each loss. Understanding these concepts is crucial for insurance intermediaries to ensure clients obtain adequate coverage.

Life and personal accident insurance are typically considered benefit policies, not indemnity policies, because indemnity aims to restore the insured to their pre-loss financial position, which is not applicable to death or injury. Statement I is correct because life and personal accident policies pay out a predetermined benefit amount upon the occurrence of a covered event, regardless of actual financial loss. Statement II is incorrect because life and personal accident insurances are generally regarded as involving an unlimited insurable interest, meaning indemnity principles don’t strictly apply. Statement III is correct because property insurance policies often allow insurers to settle losses through cash payment, repair, replacement, or reinstatement, providing different methods of achieving indemnity. Therefore, statements I and III are correct.

Product development is a continuous process for insurers to stay competitive and meet evolving customer needs. Large insurers, those dealing with compulsory insurance, and those with established policy wordings all need to engage in product development. The market changes, regulations evolve, and customer expectations shift, requiring insurers to adapt their offerings. Ignoring product development can lead to stagnation and loss of market share. Therefore, product development is an ongoing necessity for all insurers, regardless of size, type of business, or existing policies.

I. Correct. According to the Insurance Authority’s Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) (GL3), an Insurer should appoint a Money Laundering Reporting Officer (MLRO) to oversee the implementation of AML/CFT systems.
II. Correct. Insurers are required to implement clear policies and procedures regarding internal reporting, reporting to the Joint Financial Intelligence Unit (JFIU), post-reporting risk mitigation, and prevention of tipping off, as outlined in GL3.
III. Incorrect. While keeping records of STRs is important, the AML/CFT systems should also include keeping proper records of internal reports, CDD information, transaction records and other records that are necessary and sufficient to meet the statutory and regulatory requirements.
IV. Incorrect. Individual insurance agents are usually required to provide all customer and transaction related documentation to the insurer directly, and they do not have the capacity to maintain such documents. Under this arrangement, and from the perspective of meeting the record -keeping requirements set out in Part 3 of Schedule 2 to the AMLO , these individual agents are considered to have deposited the required records and documents at the premises of the insurer. However, the individual insurance agents should still ensure that the insurer to which they provide the records and documents has systems in place to comply with all the record -keeping requirements under the AMLO; and such records and documents are accessible from the insurer without delay upon request by the IA.

Therefore, statements I and II are correct.

A defective contract is one that is void, voidable, or unenforceable due to various reasons. A void contract is not legally binding from the outset. A voidable contract is valid but can be cancelled by one of the parties due to circumstances like misrepresentation or duress. An unenforceable contract is valid but cannot be enforced in court, often due to lack of proper documentation or legal requirements. Understanding the distinctions between these types of defective contracts is crucial in insurance to determine the validity and enforceability of insurance policies. The agent’s duty to the principal requires them to act in the principal’s best interest, including informing them of any potential issues with the contract.

The Insurance Ordinance (IO), formerly known as the Insurance Companies Ordinance (Cap. 41), is the primary legislation regulating the insurance industry in Hong Kong. Let’s analyze each statement:

Statement I: Correct. The Insurance Ordinance (IO) is indeed the main legislation governing the insurance sector in Hong Kong.

Statement II: Incorrect. While the Hong Kong Federation of Insurers plays a significant role in the industry, the Insurance Authority (IA), established under the Insurance Ordinance, is the primary regulator, not the HKFI.

Statement III: Correct. The IO covers both long-term (life) and general insurance businesses, setting out regulatory requirements for each.

Statement IV: Incorrect. The renaming occurred in 2017, not 2000, following amendments to the original Insurance Companies Ordinance.

Therefore, statements I and III are correct.

Statement I is correct. Under the OSCO and DTROP, failing to disclose knowledge or suspicion of property related to an indictable offense or drug trafficking, as soon as reasonably possible, is an offense punishable by imprisonment and a fine.

Statement II is correct. “Tipping off” under the OSCO and DTROP, which involves disclosing information that could prejudice an investigation following a disclosure, is an offense with a maximum penalty of imprisonment and a fine.

Statement III is incorrect. Under the UNATMO, failing to disclose knowledge or suspicion of property related to terrorist property carries a maximum term of imprisonment of 3 months and a fine of HK$50,000 upon conviction, not imprisonment for 7 years and a fine of unlimited amount.

Statement IV is incorrect. The maximum penalty for contravening targeted financial sanctions under the United Nations Sanctions (Democratic People’s Republic o f Korea) Regulation (Cap. 537AE) and the United Nations Sanctions (Joint Comprehensive Plan of Action – Iran) Regulation is imprisonment for 7 years and a fine of unlimited amount. The statement is incorrect because it states imprisonment for 3 years and a fine of HK$50,000 upon conviction.

Therefore, statements I and II are correct.

Statement I is correct. An automatic reinstatement clause does allow the restoration of the aggregate limit, either through mutual agreement via endorsement or a pre-agreed clause, as per the policy terms. This ensures continued coverage up to the original aggregate limit, even after claims have been paid.

Statement II is also correct. In the context of non-marine insurance, ‘average’ refers to a policy provision that imposes a penalty for under-insurance when a claim occurs. This encourages policyholders to insure their assets for their full value.

Statement III is incorrect. A bailee is someone who takes possession of goods with the owner’s consent, but without the intention of transferring ownership. The key distinction is the absence of intent to transfer ownership.

Therefore, statements I and II are correct.

Individual licensees are required to report their Qualified CPD Activities to the Insurance Authority (IA) using a CPD Declaration Form within two months after the end of the assessment period, specifically by September 30th. Any excess CPD hours cannot be carried over to future assessment periods. Licensees must also inform their principals about the reported CPD activities by the same deadline. Licensees must retain documentary evidence of their CPD activities for at least three years after the assessment period and provide it to the IA upon request for compliance checks. Principals are responsible for ensuring their appointed licensees comply with CPD requirements and should verify the submitted CPD Declaration Forms. Therefore, the correct answer will include the accurate reporting deadline and the retention period for CPD records.