IC85 - Reinsurance Management Exam - 1

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Q 1. What is the primary economic basis for insurance and reinsurance?

Law of Large Numbers

Actuarial science

Risk pooling

Premium payments

Reinsurance contracts

Q 2. When was the first reinsurance contract in the fire insurance business concluded?

1370

1681

1746

1778

1821

Q 3. What is the key goal of reinsurance regulations in India concerning overseas placements and sessions?

To maximize overseas sessions with foreign reinsurers

To encourage every insurer to cede at least 50% of their premium overseas

To ensure that one reinsurer receives cessions equal to or exceeding 50% of all premium ceded overseas

To assist the Indian market in retaining maximum premium before reinsuring overseas

To limit all overseas placements to 5% of the total premium ceded

Q 4. Why is the protection of solvency margins essential for an insurance company?

To prevent the government from intervening in the insurer's business

To increase the financial reserves to support decreasing assumption of risks

To maintain a low expense ratio

To ensure long-term profitability and compliance with solvency norms

To pay high dividends to shareholders

Q 5. What is one drawback of facultative obligatory treaties?

They are widely used in all classes of insurance

They are considered secure and reliable for primary reinsurance

The ceding commission for these treaties is high

They involve complex and unique special conditions

The exposure is high, and the premium is low

Q 6. How does the percentage retained by the ceding insurer in quota share reinsurance compare to that in surplus reinsurance?

It is higher in quota share reinsurance.

It is lower in quota share reinsurance.

It is the same in both quota share and surplus reinsurance.

The percentage retained varies in quota share reinsurance.

The percentage retained varies in surplus reinsurance.

Q 7. How is the level of ceding commission determined in a reinsurance treaty?

It is fixed and non-negotiable.

It is determined based on the reinsurer's profit.

It is calculated automatically based on the sum insured.

It is decided through negotiation between the ceding insurer and reinsurers.

It is calculated as a fixed percentage of the original premium.

Q 8. What is the primary difference between proportional reinsurance and surplus reinsurance?

Proportional reinsurance shares premiums, while surplus reinsurance shares claims.

Proportional reinsurance allows the reinsurer to retain a part of the original insurance, while surplus reinsurance reinsures the entire risk.

Proportional reinsurance involves a fixed percentage of every risk, while surplus reinsurance allows the ceding insurer to retain its chosen risks.

Proportional reinsurance is an automatic agreement, while surplus reinsurance requires negotiation for each risk.

Proportional reinsurance operates simultaneously with the original insurance, while surplus reinsurance is delayed.

Q 9. What is co-insurance in the context of excess loss cover?

Co-insurance reduces the reinsurance premium.

Co-insurance is another term for umbrella excess of loss cover.

Co-insurance is a percentage of the retained loss that the reinsurer retains.

Co-insurance is the same as the whole account excess of loss cover.

Co-insurance is an alternative term for deductible.

Q 10. Which year had the highest burning cost percentage for the non-proportional treaty?

2008

2009

2010

2011

2012

Q 11. Which two methods are commonly used to determine which claims fall within the scope of an excess of loss reinsurance contract?

"Claims occurring" basis and "Premium payment" basis

"Losses occurring" basis and "Risk attaching" basis

"Reinsurance coverage" basis and "Loss settlement" basis

"Claims reporting" basis and "Claims verification" basis

"Incident date" basis and "Loss resolution" basis

Q 12. What does a larger portfolio of risks typically result in?

Lower profit margins

Greater fluctuations

More accurate predictions

Increased regulatory scrutiny

Reduced underwriting capacity

Q 13. Why is it necessary to modify the retention schedule in cases where more than one risk can be affected by one event?

To increase premium income

To lower the retention amounts

To ensure equitable reinsurance coverage

To eliminate claims entirely

To control reinsurance expenses

Q 14. What factors influence the rating of the first layer of the catastrophe cover in reinsurance?

The administrative effort involved

The underwriting data and record of large losses

The limit of cover provided

The reinsurer's willingness to negotiate rates

The reinstatement provisions

Q 15. What is the typical reinsurance method used in the Miscellaneous Department for Personal Accident, Cash-in-Transit, and Burglary?

Excess of loss basis

Aggregate deductible

Unlimited cover

Proportional basis

Surplus basis


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