Reinsurance Questions for Pre-Promotional Exercise

1..Reinsurance is the insurance of the risk assumed by

a. Insured
b. reinsurance broker
c.insurer
d.Lloyds

2.The Indian Reinsurance company is called

a. Indian guarantee
b. India re
c. General Insurance company
d. Both a &b

3.SWIFT is an acronym for

a. Single Window International facultative and Treaty.
b. Single window Indian facultative and Treaty
c. Single Window International Funds tranfer and treaty
d. Single Window Indian Facultative Funds Transfer.

4. In the 2011-12 reinsurance programme the obligatory cession is

a.15%
b.10%
c.20%
d.25%

5.Which of the following is not a function of reinsurance

a. Increasing the capacity of aeinsurer
b. Minimising the effects of catastrophe
c. Providing market intelligence to the insurers
d. None of the above.

6.The relation between Insurer and reinsurer is based on

a. Financial stability of reinsurer
b. Utmost goodfaith
c. contractual agreements
d. All of the above

7.Which of the statements is false

a.Enhancing ability to accept larger lines
b.ability to write untested and new exposures.
c. To facilitate underwriters to write an account which is homogenous in both sizeand quality of risk.
d.allowing insurer to absorb catastrophic losses.

8.Which is not a method of Reinsurance

a.Facultative
b. Facultative proportional
c. Facultative obligatory
d. Treaty

9.The term Line in reinsurance refers to

a. Net retention
b. amount ceded
c. Premium paid
d. None of the above.

10.Reinsurers may draft their exclusions excluding

a.risks from a newly established company
b.Hazardous risks within the competence of the ceding insurance company
c. Risks in which ceding company is inexperienced
d. All of the above.

11.Bordereaux is
a. A statement of premium and claims to reinsurer
b. essential for maintaining accounts
c. a list of risks reinsured
d. account of risks covered and premium paid only

12.Which of the following is not correct in respect of Proportional treaties

a. Negotiated on a continuous basis
b. renewed automatically
c. different terms are given every year
d.Review of terms prior to renewal

13.What is Excess of loss primarily not designed for

a. To protect against large losses
b. to reduce unnecesssary cession of premium
c. to provide blanket coverage
d.to cover for property insurance usually

14.X A claim falling under the scope of the treaty will be shared between the ceding insurer and
reinsurer in the same proportion as the original suminsured was reinsure.
Y. The ceding insurer is not allowed to collect the whole loss from a oly one reinsurer
Z. The reinsurer is liable for share of claims costs also
Which of the above is correct
a. X only
b. X & Y
c. All of the above
d. None of the above

15.The follwing is not an advantage of Quota share treaties to a reinsurer

a. Higher rate of ceding commission
b. Larger share of premium income is passed on to reinsurer
c. He participates in the riskon the same basis as ceding reinsurers
d. Selection of risk against reinsurer is avoided.
16.The following does not apply to quota share treaties
a.The same percentage of each and every risk is ceded
b.It is irrespective of whether risk is good or bad
c. claims are also ceded in the same percentage
d.Premium is decided on basis each and every risk.
17.Which of the following is not true regarding Reinsurance contract wordings?
a. Describes scope of cover and various procedures
b. Wordings should be clear and unambiguous
c. Standard set of wordings are used.
d.General and special wordings are used.

18.Which of the principles of insurance do not have a direct consequence on reinsurance contracts.?
a.Insurable Interest
b. Utmost good Faith
c. Existence of subject matter
d. Proximate cause

19.In which type of reinsurance do the parties sometimes sign only the slip and not the wordings.
a. Facultative
b.Quota share treaty
c Excess of loss treaty
d. All of the above

20.The Premium registered in the books of an insurer at the time a policy is issued is called
a. Earned Premium
b. Unearned Premium
c. Written Premium
d. Registered Premium

21.Which of the following marine cargo reinsurance policies are treated as risk booked under the
Indian reinsurance program
a.Policies with sum insured upto Rs2crs.
b. Policies with suminsured exceeding Rs2crs
c.Policies with sum insured upto Rs2.5crs
d. Policies with s.I. upto Rs1cr

22.. “CESSION” is the terminology in reinsurance where

a.Amount of insurance an insurer transfers to reinsurer
b.Amount of insurance an insurer kept as retention
c.The limit of amount of insurance an insurer can write
d.Amount of insurance the reinsurer cedes to another insurer/reinsurer

23.The retention limits of an insurer should be set keeping in mind

a.the protection of solvency ratio
b.if its too low, larger part of premium is ceded and profit reduced
c. if its too high claims increase and profits are reduced.
d.all the above

24.Factors which do not influence the retention are

a. The company's assets
b. Capital fund
c. Profit and loss of previous years
d. Free reserves

25.Retention is a combination of the various factors.. which does not form a part of it?
a. Financial consequences of risk and
b. Event based losses
c. Rating liquidity and return
d.Balance sheet of the company

26.Accumulation of risks between branches is most likely in

a. Fire/liability
b.PA/ liability/ aviation
c. All of the above
d. None of the above.

27.The retention of property insurance is not based on

a. Location
b. Separation & process carried on
c. No of working personnel
d. class of construction and fire protection

28.Excess of loss is not suited for which of the following

a.Workmens compensation
b. Machinery Breakdown
c. Motor Third party
d. Group personal accidental insurance.

29.The most advantageous treaty in respect of engineering insurance is

a. Faculatative
b.Surplus
c Excess of loss
d.Quota share with Excess of loss

30.Which of the following is not important for fixing retention in marine cargo
a. Whether the cover granted in the majority of cases is on all risk terms or limited terms
b.Whether the type of packaging is standardised
c. Breakdown of premium by the age and size of vessel carrying the cargo
d. Exposures in respect of different types of cargo

31.The selection of Reinsurers should not depend on

a. rating in market of reinsurers
b. Technical and administrative viability of Reinsurers
c.Cheapest available reinsurer
d.good relationship issues with reinsurers

32.The benefits derived from a reciprocal exchange of treaties are

i) to add to net premium and net profit
ii)offers greater spread for the net retained portfolio
a. Only (i) above
b.Only (ii) above
c. Both (i) & (ii) above
d. None of the above.

33.Which of the following is not an objective of reinsurance accounting

a. Control of funds
b. underwrite the business
c. Maintain a proper record for the stake holders of the firm
d. maximise shareholders value

34.An intermediary in a reinsurance contract

a. Prepares reinsurance slip in consultation with insurer
b. circulates amongst various reinsurance companies
c. obtains the best terms and hands over documntation to insurers.
d. Gets his brokerage from insurers.

35.Which of the following is not a feature of the "Reinsuring the original risk clause".
a. Obligatory nature of reinsurance is mentioned
b. Method of cession is stated
c. Brokerage terms are stated
d. Business as covered is stated.

36.NCAD in relation to reinsurance clauses means

a. Notice of continuation at anniversary date
b. Notice of cancellation at anniversary date
c. No claims at anniversary date
d.Notice of continuation at death

37.Which of the following is not a common clause in Reinsurance agreements

a. Reinsuring the original risk
b.Commencement and termination
c.Alterations
d. Intermediaries

38.Set off clause means

a. setting off accounts of one reinsurer against another
b. Setting of profits against losses
c. setting of liabilities against assets
d. setting of net amounts due against those payable.

39.Accounting clause does not provide for

a. set off of balances
b. time frame for submission of reinsurance accounts
c. procedure for confirmaion and settlement of balances
d. Provision if any for rendering accounts on underwriting year basis.

40.Loss advices and accounting of losses clause does not include

a.Losses normally intimated to reinsurer in accounts
b. Advice to be given to reinsurer when loss reaches an agreed amount
c. Currency in which accounts are to be settled
d. Requirements for advices of outstanding losses at anniversary dates

41.Follow the fortunes clause means

a. Reinsurance is subject to same terms and conditions as original insurance
b.The financial losses of ceding insurer will be taken over by the reinsurer
c. If the ceding insurer goes bankrupt, reinsurer is not entitled to his share of premium
d.Reinsurer follows the entire business fortunes of the ceding insurer

42.Ultimate Net Loss is also called

a. Adjusted Loss
b.Gross Loss
c. Ground Up Loss
d.Reinsurance loss

43.Cut Through clause means

a. The final insured will have direct rights against reinsurers
b. The Final insured will have direct rights against insurer
c. The final insured will have direct rights against the statutory agency.
d.The final insured will have direct rights against the intermediary.

44.The phrase " Loss Occurrence" would mean all individual losses arising out of and directly
occasioned by one catastrophe. The duration and extent of any one " loss occurrence" commonly
means
a. 72 consecutive hours as regards a hurricane, typhoon, windstorm,rainstorm,hailstorm and
or tornado
b. 84 hours as regards eathquake seaquake tidal wave and or volcanic eruption
c. 172 consecutive hours and within the limits of any one state as regards riots, civil commotions and
malicious damage.
d.240 hrs for any other catastrophe of whatso ever nature

45.In Liability Excess of loss reinsurances the concept of what constitutes one loss is complicated
and the common methods are given as statements one of which is wrong. Pick it out
a. Occupatonal diseases are aggregated into one occurrence for all empoyees one insured contracting
the same disease during one original policy period.
b. In Public Liability all accidents arising from one machine during one policy period are
treated as one loss.
c In Products Liablity all claims arising from manufature or distribution of one faulty batch or Lot
are regarded as one occurrence
d.In fidelity insurance losses which are covered on a " losses discovered basis" can be limited to the
acts one individual or more than oone if acting in collusion.

46.Reinsurance commission is an item paid by

a.ceding insurer to broker
b.reinsurer to broker
c. reinsurer to ceding insurer
d. reinsure to agent

47.The function of reinsurance commission is to reimburse ceding insurer for

a.Expenses for business acquisition
b.Claims adjustment to ceding insurer
c a and b
d. None of the above.

48.Which of the following is not a method of reinsurance commission

a. Flat rate of commission
b. Sliding scale of commission
c.Sales turnover commission
d.Sliding scale of commission

49.Earned premiums definition does not include

a. Premiums ceded and included in the accounts for the year in question
b. Reserve for unexpired risk brought forward from the previous year.
c.Reserve for unexpired risk at the end of the current year
d. premium received in advance

50.In a sliding scale of commission table

a. Commission is directly related to loss ratio
b. Commission is directly related to gross premiums
c. Commissionis directly related to portfolio losses
d Commission is directly related to outstanding losses

51.Overriding commission payable may calculated on

a. Gross premium
b. Net premiums
c a &b
d. none of the above.

53.One of these is not the method for calculating profit commission

a.Profit commission is an additional percentage payable to a ceding insurer
b.Incentive for a ceding insurer to produce profitable business.
c. It is calculated on underwriting year basis or accounting year basis.
d. Profit commission is payable if insured's business produces profit.

53.One of the following does not belong on the credit side of a profit commission statement
a.Premium reseve brought forward
b. Loss reserve brought forward
c. Miscelleneous charges
d. Premiums

54.This method for reinsurance commission is very easy to account, as the commission payable is
determined by applying the agreed percentage of commission to the premium ceded loss returns and
cancellation
a.Sliding scale of commission
b.Overriding commission
c.Flat rate of commission
d.All of the above

55.The portfolio tranfer percentage of 35% to 40% is arrived at by the

a. 45% method
b. 60% method
c. 50% method
d. 75% method

56.Cleancut method in portfolio transfer is

a. Where portfolio premium and losses are withdrawn from all outgoing reinsurers at the year end
and corresponding entries are given to renewing reinsurers
b. Where portfolio reserves are transferred to renewing reinsurers
c. a & b
d. None of the above

57.One of the following does not form part of the various records maintained for proper
management of a successful inward account are
a. accounts flow chart
b. cash loss register
c. outstanding claims register
d. Checking of accounts

58.In the international market 25 % of the world's aviation business is done at

a. Swiss Re
b. Munich Re
c. Lloyds
d. None of the above.

59.Which of the following terms in Reinsurance indicate a synonymous set of participants with pre-
determined and fixed interest in all business written
a. Group
b.Association
c. Syndicate
d.pool

60.Long Tail Liability can arise in

a. Malpractice insurance
b. Worlmens compensation
c. Products liability
d.Errors and omissions liability

61. Retrocession is
a. ceding of insurance
b.Transfer of insurance
c. Direct reinsurance.
d. reinsuring of reinsurance.

62.Which is not a form of alternative risk technique to reinsurance

a. Risk transfer
b.Risk retention financing
c. Asset Management
d. Investment

63.International specialist pools are necessary for

a. Fire insurance
b. Marine cargo insurance.
c. Terrorism
d.Marine hull insurance.