IC85 - Reinsurance Management Exam - 6

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Q 1. What is the significance of the "IMF wage index" in the "Index Clause"?

It determines the level of government tax on claims payments.

It defines the company's internal monetary fund for claims settlement.

It reflects changes in international labor wages over time.

It is used to calculate inflation rates in the region.

It sets the exchange rate for claims payments in foreign currency.

Q 2. In the case of outward treaties executed in India, who is responsible for getting the copy to be retained in India?

The foreign ceding insurer

The Indian reinsurer

The local Stamp Office

The broker

Both the ceding insurer and reinsurer jointly

Q 3. In the context of proportional treaty accounts, why have attempts to introduce standard formats met with limited success?

Lack of interest from ceding insurers and reinsurers

Complex international regulations

Universal acceptance of existing formats

Diverse international nature of the reinsurance market

Insufficient resources for ceding insurers and reinsurers

Q 4. In which type of reinsurance treaties is profit commission typically calculated on an accounting year basis?

Fire and Accident proportional treaties

Marine and Aviation proportional treaties

Non-proportional treaties

Overriding commission treaties

Brokerage treaties

Q 5. Why is the natural expiry method of cancellation no longer practical and cost-effective in modern reinsurance?

It allows for a clean transition to new reinsurers

It is the most cost-effective option

It involves excessive administrative work and multiple accounts

It is legally prohibited in many countries

It leads to lower profitability for ceding insurers

Q 6. What is the purpose of deducting brokerage from the minimum and deposit premium?

To reduce the reinsured's share of the premium

To calculate the reinsurance commission

To secure the broker's fee

To cover the reinsurer's claim expenses

To ensure accurate accounting entries

Q 7. How does IFRS impact the presentation of reinsurance transactions?

It requires a net presentation of reinsurance transactions.

It mandates offsetting of reinsurance assets against related liabilities.

It enforces the Gross presentation of reinsurance transactions.

It encourages reinsurance assets to be combined with related insurance assets.

It doesn't have any impact on the presentation of reinsurance transactions.

Q 8. What is the primary tax in India levied on direct premiums related to insurance?

Value Added Tax (VAT)

Corporate Tax

Premium Tax

Service Tax

Income Tax

Q 9. What is no longer an option for any reinsurer with the arrival of cheap capacity in the catastrophe reinsurance market?

Establishing Alternative Risk Transfer capabilities

Providing permanent capital to the insurance industry

Focusing on corporate value and objectives

Offering swaps and securitization

Providing capacity alone

Q 10. In which geography has Labuan, located near Kuala Lumpur, emerged as a reinsurance center for the Far East?

Bermuda

Singapore

Dubai

Hong Kong

Labuan

Q 11. How is the claims payment process at Lloyd's automated to improve efficiency?

Claims are settled manually through negotiations

Brokers must visit Lloyd's offices to collect claim payments

Claims are paid in cash

Claims are settled through an online system

Claims are settled directly to the broker's account

Q 12. What differentiates Lloyd’s from traditional insurers?

Lloyd’s has a Department of Trade to supervise its operations.

Each member of Lloyd’s Syndicate has unlimited liability.

Lloyd’s operates as a conventional insurance company.

Lloyd’s primarily targets the reinsurance business.

Lloyd’s does not have its underwriters.

Q 13. What aspect of an insurer's or reinsurer's approach is influenced by the short-term nature of the credit rating process?

Long-term investment strategies

Compliance with government regulations

Market decisions and the use of credit rating information

Management of day-to-day operations

Technological advancements in the insurance industry

Q 14. In India, what requirements do credit rating agencies engage in the rating of securities offered by the public, or do rights issues need to be fulfilled?

Compliance with advertising regulations

Registration with the Ministry of Finance

Approval from the Reserve Bank of India

Obtaining a license from the Securities and Exchange Board of India (SEBI)

None of the above

Q 15. How does a double-trigger policy reduce the probability of a loss payment from an insurer's perspective?

It increases the likelihood of loss of payment

It doesn't affect the probability of loss of payment

It requires additional premium payments

It lowers the rate of premium

It raises the rate of premium


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