IC85 M0ck Test Sample 2
Reinsurance involves transferring risk from insurers to reinsurers to maintain financial stability and manage large exposures. Key factors include understanding the ceding insurer’s underwriting quality, maintaining a balanced portfolio, and setting proper retention levels. Intermediaries play roles in premium handling and coordination. Treaties like proportional and excess of loss help manage different risk types. Events like 9/11 highlighted catastrophic risk exposure, leading to stricter controls. Concepts such as long-tail business, underwriting year basis, and commission structures are crucial. Effective reinsurance design depends on loss patterns, experience, and global practices to ensure profitability and sustainability.
Q1. Why should a reinsurer know about the ceding insurer’s underwriter?
a) Travel history
b) Fame
c) Hobbies
d) Reputation and experience
Q2. Why is portfolio balance important in first surplus treaty?
a) Minimize premium
b) Maximize profitability
c) Simplify administration
d) Wide distribution
Q3. Role of intermediary in reinsurance?
a) Underwriting
b) Collecting premiums
c) Handling claims
d) Issuing policy
Q4. Retention clause protects?
a) Maximum liability
b) Direct insurance
c) Retrocessions
d) Net retention
Q5. Why was terrorism cover cancelled post 9/11?
a) Not significant
b) Non-war declaration
c) Loss exceeded $70B
d) No pressure
Q6. Retention in surplus reinsurance is called?
a) Surplus limit
b) Line
c) PML
d) Quota share
Q7. Long tail business means?
a) No claims
b) Secured claims
c) Immediate claims
d) Delayed claims
Q8. After nationalization Indian reinsurer?
a) SEBI
b) NFC
c) GIC
d) IRDAI
Q9. Underwriting year basis applies to?
a) Fire proportional
b) Fire non-proportional
c) Marine proportional
d) Marine non-proportional
Q10. Who contributes in program design stage?
a) Only reinsurer
b) Brokers only
c) Intermediaries only
d) Reinsurer & intermediaries
Q11. Retrocession is required for?
a) Excess underwriting
b) Sharing risk
c) Economic lines
d) Control risk
Q12. Flat rate commission means?
a) Fixed % on premium
b) Variable rate
c) Bonus-based
d) Profit-based
Q13. Obligatory contract refers to?
a) Treaty contract
b) Retrocession
c) Facultative
d) Indemnity
Q14. Important factor in reinsurance design?
a) Loss frequency & size
b) Location
c) Admin capacity
d) Investment policy
Q15. Retention is managed on?
a) Underwriting
b) Potential
c) Inflation
d) Risk
Q16. IMF wage index below 10% means?
a) Apply with IRDA
b) Add 50% premium
c) Not applicable
d) Fully applied
Q17. Factors affecting XL premium rate?
a) Excess point
b) Business class
c) Past experience
d) All of these
Q18. Liability in proportional treaty starts with?
a) Reinsurer first
b) Insurer first
c) Depends on IRDA
d) Depends on agreement
Q19. Objective of Oil & Energy Syndicate?
a) Underwrite energy risk
b) Trade oil
c) Regional pool
d) None
Q20. Reinsurance for property risk protection?
a) Only Stop Loss
b) Risk XL & Facultative XL
c) Only Risk XL
d) Only Aggregate XL
