IC85 M0ck Test Sample 1
Reinsurance is based on risk pooling and the law of large numbers, helping insurers manage large or uncertain risks. It supports solvency, stability, and capacity by transferring part of the risk to reinsurers. Various methods like proportional and non-proportional treaties are used depending on business needs. Retention limits, commissions, and pricing are decided through actuarial analysis and negotiation. Regulations in India aim to retain maximum premium within the domestic market. Tools like catastrophe cover, excess of loss, and surplus treaties help manage exposure. Overall, reinsurance ensures financial strength, better risk distribution, and long-term sustainability of insurance companies.
Q1. What is the primary economic basis for insurance and reinsurance?
a) Law of Large Numbers
b) Actuarial science
c) Risk pooling
d) Premium payments
Q2. When was the first reinsurance contract in fire insurance business concluded?
a) 1370
b) 1681
c) 1746
d) 1778
Q3. What is the key goal of reinsurance regulations in India?
a) Maximize overseas cessions
b) Encourage 50% overseas cession
c) Ensure one reinsurer gets 50%
d) Retain maximum premium in India
Q4. Why is protection of solvency margins essential?
a) Avoid government intervention
b) Increase reserves only
c) Maintain low expenses
d) Ensure long-term profitability
Q5. What is one drawback of facultative obligatory treaties?
a) Widely used
b) Highly secure
c) High commission
d) Complex conditions
Q6. Retention in quota share vs surplus reinsurance?
a) Higher in quota share
b) Lower in quota share
c) Same in both
d) Varies in surplus
Q7. Which year had the highest burning cost percentage?
a) 2008
b) 2009
c) 2010
d) 2011
Q8. What does a larger portfolio of risks result in?
a) Lower profit
b) Greater fluctuation
c) More accurate predictions
d) Regulatory scrutiny
Q9. Typical reinsurance method in Miscellaneous Department?
a) Excess of loss
b) Aggregate deductible
c) Unlimited cover
d) Proportional basis
Q10. How is ceding commission determined?
a) Fixed always
b) Based on reinsurer profit
c) Automatic calculation
d) Through negotiation
Q11. Difference between proportional and surplus reinsurance?
a) Share premium vs claims
b) Partial vs full risk
c) Fixed % vs flexible retention
d) Automatic vs delayed
Q12. Co-insurance in excess of loss means?
a) Reduces premium
b) Umbrella cover
c) % of retained loss
d) Same as deductible
Q13. Methods for determining XOL claims?
a) Claims occurring & premium
b) Losses occurring & risk attaching
c) Coverage & settlement
d) Reporting & verification
Q14. Why modify retention schedule?
a) Increase premium
b) Lower retention
c) Ensure equitable cover
d) Eliminate claims
Q15. Who signs facultative reinsurance policy?
a) Insured
b) Reinsurer
c) Intermediary
d) Underwriter
Q16. Rating of first catastrophe layer depends on?
a) Admin effort
b) Past loss data
c) Cover limit
d) Negotiation willingness
Q17. Purpose of Keyman insurance?
a) Protect key person
b) Accumulation risk
c) Business debts
d) Employee benefit
Q18. Major challenge in reinsurance for large vessels?
a) High premiums
b) Claims process
c) Freedom of rating
d) Joint Hull Formula
Q19. Retention limits are determined by?
a) Government
b) Formulas
c) Underwriter choice
d) Finance dept
Q20. Significance of good gross direct account?
a) Balanced portfolio
b) Small surplus
c) Loss ratio estimate
d) Higher retention policy
