IC85 - Reinsurance Management Exam - 9

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Q 1. What is a key feature of facultative obligatory treaties?

Complex and unique special conditions for each treaty

High exposure and high premium

Security and reliability as primary reinsurance

Purchase of numerous treaties for added reinsurance protection

Progressive ceding commission that matches quota share and surplus treaties

Q 2. What is a "second surplus treaty" in reinsurance?

An additional surplus treaty that automatically follows the first surplus treaty.

A reinsurance treaty that insures against second-party liability.

A type of facultative reinsurance.

A surplus treaty was arranged for the second time in the same calendar year.

A surplus treaty for smaller risks.

Q 3. In reinsurance, what happens to claims that fall within the scope of a treaty?

Claims are solely paid by the reinsurer.

Claims are paid by the ceding insurer, and the reinsurer is not involved.

Claims are shared between the ceding insurer and the reinsurer in the same proportion as the original sum insured was reinsured.

Claims are fully borne by the ceding insurer without any involvement from the reinsurer.

Claims are covered only if they exceed the ceding insurer's retention.

Q 4. When does the liability of a reinsurer commence in proportional reinsurance?

Simultaneously with the ceding insurer

After the original insurer pays the claims

When the reinsurer decides to accept the risk

When the insured event occurs

At the end of the ceding insurer's financial year

Q 5. What is one of the most challenging decisions for the reinsured when setting the retention over loss cover?

Determining the ceding commission percentage.

Deciding on the type of excess loss cover.

Calculating the claims' costs.

Setting the ideal level of retention.

Estimating the ultimate net loss.

Q 6. Why might the size of claims in reinsurance be rising?

Administrative problems of the reinsurer

Normal delay in claims reporting

Increasing sums insured, increasing court awards, and inflation

Catastrophic events

Low retention levels

Q 7. What is the purpose of using the "risk attaching" basis over loss reinsurance contracts?

To simplify the claims settlement process

To reduce the reinsurer's long run-off exposure

To exclude policies issued during the contract period

To provide coverage only for the present year's policies

To allow for multiple reinstatements

Q 8. What is one of the potential drawbacks of long-term investments for insurers?

Lower interest rates

High liquidity risk

Illiquid assets

Premature closure

Exposure to capital loss

Q 9. What does PML stand for in the context of property insurance?

Property Management Level

Probable Maximum Loss

Premium Margin Limit

Policy Management Limit

Profit Margin Level

Q 10. What type of cover derives its premium from a limited number of risks in reinsurance?

The first layer of catastrophe cover

Second surplus treaty

Auto/Fac cover

Facultative cover

Working excess of loss cover

Q 11. How are retentions typically scaled down in marine - Cargo reinsurance?

By type of cargo

By the age and size of the vessels

By the number of reporting offices

By the geographic distribution of risks

By the history of claims

Q 12. What does setting up a table of limits in fire insurance involve?

Calculating gross direct business losses

Evaluating risks and hazard locations to determine appropriate retentions

Determining reinsurance commission rates

Allocating proportional treaty limits

Calculating excess loss cover costs

Q 13. What is the primary concern for a marine cargo insurer when considering reinsurance?

Inland transit by rail or road

Individual policy amounts

Accumulation of risks per voyage

Rate of premium

Air transit coverage

Q 14. Why is the size and structure of the portfolio an important factor in reinsurance program design?

It affects the management's philosophy on program objectives.

It determines the geographical location of operations.

It influences the financial strength of the insurer.

It helps in analyzing the exposure to various perils.

It is essential for making fuller use of local reinsurance capacity.

Q 15. Why does a reinsurer consider the danger of accepting too much business of a particular class in a particular territory?

To maximize the number of policies.

To ensure business growth.

To maintain balance in their business and avoid heavy losses.

To offer discounts to ceding insurers.

To compete with other reinsurers.



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