NATIONAL INSURANCE COMPANY LIMITED

NAGPUR REGIONAL OFFICE

Reinsurance Question Bank

Index

Reinsurance Page 2

Answer Key Page 9

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 Reinsurance

Q. 1. A Re-insurance contract is
A. An extension of the original insurance contact
B. A guarantee for the original insurance contract
C. A separate and independent contract
D. None of the above

Q. 2. What amount would the reinsurer pay if the insurer has an excess of loss treaty for Rs.10,000,000/-
excess of Rs.5,000,000/- and as a result of a storm insurer suffers a loss totaling Rs.7,000,000/-
A. 2,000,000/-
B. 7,000,000/-
C. 5,000,000/-
D. No payment would be made

Q. 3.Reserve for unexpired risk is calculated on

A. premium received including reinsurance ceded but excluding reinsurance received.
B. premium received including reinsurance ceded and reinsurance received.
C. premium received excluding reinsurance ceded and including reinsurance received.
D. premium received excluding reinsurance ceded and excluding reinsurance received

Q.4. The automatic capacity of underwrite business beyond retention is arranged through
A. Excess of Loss
B. Surplus Treaty
C. Stop loss
D. Facultative

Q.5. The contract under which a reinsured is obliged to cede a fixed percentage of the risks falling
within the scope of the policy is called
A. Quota Share Treaty
B. Surplus Share Treaty
C. Excess of Loss Treaty
D. Stop Loss Treaty

Q.6. A computerized report that lists information for each and every claim is called in reinsurance
A. Case reporting
B. Summary reporting
C. Bordereau reportin
D. Bulk reporting

Q.7.What does a 'premium bordereau' contain

A. Detailed list of policies
B. Address of the original insured
C. Termination date
D. all the above

Q.8. In Sliding scale of commission arrangement

A. Commission payable varies in proportion to the loss ratio
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B. Commission payable varies inversely to the loss ratio
C. Commission payable is not related to the loss ratio
D. None of the above

Q.9. Which of the following. is not relevant in facultative re insurance

A. Sessions
B. Retrocession
C. Portfolio entry
D. Reinstatement

Q.10. Why is the concept of retention important to the underwriter

A. Because it helps the underwriter to determine the amount of reinsurance cover required
B. It helps the underwriter to know about the accumulation of risks.
C. To ensure that the insurance company is not exposed to unacceptable level of losses.
D. All the above

Q.11. Profit commission is normally paid in

A. Facultative RI
B. Excess of Loss
C. Stop Loss
D. Surplus Treaty

Q.12. Surplus Re-insurance is a form of

A. Proportional Re-insurance
B. Non-Proportional Re-insurance
C. May be either
D. All the above

Q.13. A major portion of mega risk, after ceding to surplus treaty is reinsured through
A. Excess of Loss
B. Stop Loss
C. Facultative
D. Catastrophic Excess of Loss

Q.14. Which of the following statement is /are true

A. A cedent chooses facultative Re-insurance when it does not want to be loaded with poor risk
B. Cedents normally choose facultative Re-insurance when there is not automatic Treaty at their
disposal
C. Under facultative Re-insurance both cedent and the Re-insurer have an option to accept or reject.
D. All of the above.

Q.15. In Re-insurance, a treaty designed to limit the loss of an insurer to a specified percentage of its
annual premium income for all business or a class of business is called a
A. Catastrophe Excess of Loss Treaty.
B. Excess of Loss Treaty.
C. Stop loss Treaty.
D. Surplus Treaty

Q.16. The contract where the distribution of the loss is based on the loss and not on the amount insured
is called
A. Proportional reinsurance
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B. Non-proportional Re-insurance
C. Treaty Re-insurance
D. Facultative Re-insurance

Q.17. The total sum insured of a property risk is Rs. 10 crores and retention is Rs. 1 crore the treaty limit
is Rs. 5 crores. If there is a claim of Rs. 50 lakhs the Re-insurers will pay under surplus treaty
A. Rs.50 lakhs
B. Rs.40 lakhs
C. Rs.25 lakhs
D. Rs.10 lakhs

Q.18. Facultative Re-insurance is

A. A kind of obligatory Re-insurance
B. Re-insurance arrangement administered by a faculty of insurance experts
C. A method of Re-insuring risks on individual basis without any obligation for compulsory cession
D. A method of Re-insuring risks where insurer is obliged to cede a fixed percentage of premium for all
risks written by him

Q. 19. In reinsurance parlance which of the following is only found in non- proportional treaty
agreements
A. Accounts and Statistics Clause
B. Attachment of Cessions Clause
C. Follow the Fortunes Clause
D. Ultimate Net Loss Clause

Q.20. In an XL form of Re-insurance the top and drop method is not relevant in which of the following
case
A. When there is more than one layer
B. When the number & amount of reinstatement is restricted
C. When there is a single Re-insurer
D. None of the above

Q.21. Under excess of loss if the cover is Rs. 10 crores in excess of 5 crores, then the 5 crores is known
as
A. Cover limit
B. Deductible
C. Franchises
D. Ultimate net loss

Q.22. The retention of an insurance company is protected by Reinsurance Treaty such as

A. Quota share
B. Surplus
C. Excess of loss
D. Facultative

Q.23. Absence of direct relationship between Re- insurer and insured is an essence of the Re-insurance
concept. Which of the following clause is against this concept
A. Premium adjustment clause
B. Claims cooperation clause
C. Cut through clause
D. Follow the fortune clause
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Q.24. Under excess of loss if the cover is for Rs. 20 crores in excess of Rs. 10 crores then the cover limit
is
A. Rs. 10 crores
B. Rs. 20 crores
C. Rs. 30 crores
D. None of the above.

Q.25. An arrangement in which insurer and reinsurer agree that cessions will always be a single fixed
percentage of each reinsured risk can be referred to as
A. per event excess of loss Re-insurance.
B. Per risk excess of loss Re-insurance
C. quota share Re-insurance.
D. surplus Re-insurance.

Q26. GIC handle all its non reciprocal inward into India through its division called:
1) swift
2) FAIR
3) Professional reinsurer
4) GIC Re

Q 27________ is method of re insuring risk on individual basis where the insurer has no obligation to
cede the risk nor the reinsurer has a obligation to accept.
1) excess loss of treaty
2) Surplus treaty
3) facultative
4) Facultative obligatory

Q28 The amount of reinsurance bought by a reinsurance company is called :

1) cession
2) Precession
3) reinsurance
4) retrocession

Q29. Which method of reinsurance offers higher @ of commission.?

1) Facultative
2) Surplus
3) Excess of loss
4) Obligatoty

Q30. Name the worldwide rating agency?

1) CARE
2) CRISIL
3) Standard & Poor
4) ICRA

Q31.In India IRDA has stipulated on use of insurers cannot be below:

1) AAA
2) BBB
3) CCC
4) AA

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Q32. % of service tax levied on reinsurer on reinsurance premium is:
A) 10.5%
B) 5.5%
C) 12.6%
D) 5%

Q33. F.A.I.R. stands for..............

A) Federation of Afro Asian insurer and reinsurer.
B) Federation of Asian American insurer and reinsurer
C) Federation of Asian Australian insurer and reinsurer

Q34. The pool arrangement made by reinsurer has to be submitted to the IRDA within.............
A) within 1 month
B) within 6 month
C) within 3 month
D) within 15 days

Q35. Direct insurer after its retention level, risk transfer is...........
A) retained by insured
B) ceded to reinsurer
C) ceded to pool
D) retained by direct insurer

Q36. Stop loss is suitable for?

A) Aviation
B) Mega risk
C) Hailstorm risk
D) Petrochemical risk

Q37. Which of the following is an example of 'short tail' class of business?

A) Property
B) EAR
C) Marine
D) Liability

Q38. The arrival of cheap capacity in the catastrophe reinsurance market is..................
A) Catastrophe modelling
B) E commerce initiatives
C) swap & securities

Q39. who among the following referred as banker of ins. Industry?

A) Lords of London
B) WTO
C) Rinsurer
D) Capitive companies

Q40. A single composite cover, protecting the whole business of the reinsured for all class of business
is?
A) Umbrella excess of loss cover
B) Aggregate excess of loss cover
C) Stop loss cover
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D) Whole account excess of loss cover

Q41. In case of treaty reinsurance, what is the signing rule for a reinsurance contract?
A) policy had to be signed by the ceding insurer.
B) policy has to b signed by the reinsured
C) policy has to be signed by or on the behalf of each party
D) No need of signature.

Q 42________is detailed list of the risk ceded to the treaty provided by the reinsured.
A) Cessation
B) Ceding commission
C) ceding insurer retention
D) Bordereaux

Q43. For which of the following type of business accounts are rendered on 'Accounting Year Basis'
A) Marine non proportional basis
B) Marine proportional basis
C) Fire & accident non proportional basis
D) Fire & accident proportional basis

Q44. Why Reciprocity of reinsurance business is essential?

A) To stabilize overall result
B) To increase premium volume
C) To earn profit

Q 45. Which of the following treaty do not require the clause error and omission?
A) Quota share treaty
B) excess of loss treaty
C) Surplus treaty
D) none of the above

Q46. In India reinsurer rating of BBB is required over a period of .......years?

A) 2
B) 4
C) 5
D) 1

Q47._______are reinsurance agreements entered into in writing between insurer & reinsurer shows the
terms & conditions of the contract.
A) reinsurance contract
B) treaty wording
C) Slip
D) cover note

Q48. who develop a rating system known as Insurance Regulatory information system?
A) Standard and poor
B) NAIC
C) A M Best
D) DUFF & Phelps

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Q49. With this clause the ceding insurer generally make a provision in the agreement for 'termination
without notice'
A) operative clause
B) Downgrade clause
C) commencement & termination clause
D) sudden death clause

Q50. The primary objective of reinsurance is to reduce company's probability of 'ruin'

The word 'ruin' here means
A) loss
B) bankruptcy
C) debit
D) deficit

Q51. There can be 100% reinsurance of risk

True/ false

Q52. Cedant's retention 75% of net premium in the year . Reinsurance cover 90% of 30% in excess of
75%.Net Premium Income For The year is Rs 1 crore .Net claims Paid For The Year 90 Lacs, Amount
Of Loss Paid By Reinsurer Is. Rs .....
A) 14 lacs
B) 12 lacs
C) 13.5 lacs
D) 15.5 lacs

Q 53. Reinsurance contract can be arranged in........ways.

A) 6
B) 5
C) 3
D) 2

Q 54. which form of treaty can be placed in weak reinsurance market?

A) Surplus treaty
B) excess of loss treaty
C) Faculative treaty
D) Faculative obligatory treaty

Q55. A put. Internet arrangement through which an organisation connect all its executives and offices is
called?
A) Internet
B) intranet
C) extra net
D) world wide web

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 Answer Key – Fire Insurance
1 C 29 B
2 A 30 C
3 A 31 B
4 D 32 D
5 A 33 A
6 C 34 C
7 D 35 B
8 B 36 C
9 D 37 A
10 D 38 C
11 D 39 B
12 A 40 D
13 C 41 C
14 D 42 D
15 C 43 D
16 B 44 A
17 C 45 B
18 C 46 C
19 D 47 B
20 C 48 B
21 B 49 B
22 C 50 B
23 D 51 False
24 B 52 C
25 C 53 B
26 A 54 D
27 C 55 C
28 D

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