IC85 - Reinsurance Management Exam - 5

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Q 1. What is the distinctive development that has followed liberalization in India about inward reinsurance?

The Ministry of Finance now handles all inward reinsurance.

Insurers are no longer allowed to write inward reinsurance.

Each insurer, including life insurers, can define their inward reinsurance underwriting philosophy with approval from IRDA.

Only GIC Re is permitted to offer inward reinsurance.

All inward reinsurance must be placed with foreign reinsurers.
 
Q 2. In what way does reinsurance enable an insurer to consider unusual proposals?

By refusing to cover any non-standard risks

Limiting the insurer's risk exposure

By providing a means of communication between insurers

By making it easier for insurers to carry the material consequences of unusual proposals

By excluding newer risk exposures
 
Q 3. What is retrocession in reinsurance?

The purchase of insurance by the primary insurer

The process of underwriting individual risks

The process of reinsuring the primary insurer

The process of reinsuring a reinsurance company

The ceding of risks by the reinsurer to the primary insurer
 
Q 4. In variable quota share reinsurance, how does the percentage of retention by the ceding insurer vary?

It increases with an increase in the limit of the sum insured.

It decreases with an increase in the limit of the sum insured.

It remains the same regardless of the limit of the sum insured.

It varies based on the reinsurer's decision.

It is always 50%.
 
Q 5. What is a profit commission in reinsurance?

A commission is paid by the ceding insurer to the reinsurer for achieving high profits.

An expense associated with managing the profits of a treaty.

A commission is returned to the ceding insurer when the treaty is profitable.

A fee is charged by the reinsurer to assess the profit potential.

A commission is paid by the reinsurer to brokers for achieving profitable results.
 
Q 6. In reinsurance, what is the reinsurance premium based on?

The reinsurer's discretion

The ceding insurer's profit

The original premium paid by the insured

The reinsurer's administrative costs

The net loss ratio
 
Q 7. What is the importance of defining "ultimate net loss" in non-proportional reinsurance?

To determine the gross loss amount before reinsurance recovery.

To ensure that the reinsurer becomes interested only when a loss exceeds the retained loss.

To calculate the reinsured's initial retention.

To calculate the ceding commission for the reinsurer.

To determine the net loss amount after reinsurance recovery.
 
Q 8. How much total claims cost is associated with the non-proportional treaty for the year 2012?

Rs. 0

Rs. 14,75,000

Rs. 56,00,000

Rs. 5,00,000

Rs. 18,00,000
 
Q 9. What is the main merit of the "losses occurring" basis in an excess of loss reinsurance contract?

It allows for the exclusion of claims from the present contract

It provides a simple and self-contained approach for each contract year

It requires checking of claims against the policy issuance date

It necessitates portfolio takeovers at contract inception

It requires the reinsurer to be liable for all losses, irrespective of the contract
 
Q 10. In practice, what tends to happen to an insurer's retention as the portfolio grows?

The retention remains constant.

The retention decreases proportionately.

The retention increases proportionately.

The retention fluctuates widely.

The retention is determined by the regulator.
 
Q 11. In cases where a standard schedule of retentions does not apply, what is typically done for large risks in property insurance?

Fixed retentions are always used.

Retentions are based on policy issuance dates

Retentions are determined individually through inspections

Retention percentages are increased

Retentions are based on the insured's credit score
 
Q 12. What co-insurance measure might reinsurers consider enforcing on the catastrophe layer in reinsurance?

A 20% co-insurance

A 10% co-insurance

A 5% co-insurance

A 25% co-insurance

A 50% co-insurance
 
Q 13. In which situations is a quota share arrangement a satisfactory solution in marine - Cargo reinsurance?

When there is a wide variation in values per vessel

When there is a clustering of exposures per vessel

When there is a common cause of loss

When the rates of premium are generally satisfactory

When there is a history of total loss claims
 
Q 14. Which class of property insurance is well suited for protection by a proportional treaty program due to the large number of risks involved, providing an effective means for result stabilization?

Engineering insurance

Standard fire & special perils insurance

Theft & Burglary Insurance

Industrial All Risks insurance

Property All Risks packages
 
Q 15. Why do marine insurers often use specialist types of cover for different types of ships and cargoes?

To increase premiums

To simplify the claims process

To reduce the frequency of claims

To enhance fraud detection

Due to the varied perils ships and cargoes are exposed to


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