IC85 M0ck Test Sample 4
Financial statements in insurance help assess performance, reserves, and financial stability. Reinsurers price risks using premium calculations and historical data. Traditional insurers face capital challenges, especially in soft markets. Lloyd’s market requires strict qualifications and compliance. Reinsurers act as financial stabilizers, often called bankers of the insurance industry. Credit ratings depend on reliable data and analysis. Advanced products like multi-trigger covers require multiple events. Brokers assist clients with pricing and risk solutions. Retrocession spreads risk further. Catastrophe insurance protects against major losses. Overall, effective risk management, transparency, and strong financial planning ensure sustainability in insurance operations.
Q1. Primary function of financial statements in insurance?
a) Broker commission
b) Policy tracking
c) Estimate claims
d) Revenue provisions
Q2. Method used by reinsurers to price cover?
a) Deduct tax
b) Calculate gross premium
c) Net premium only
d) Outsource pricing
Q3. Challenge of traditional capital structure?
a) Lack of capital
b) Reinsurance reliance
c) Over-employment of capital
d) Disappearance of syndicates
Q4. Lloyd’s requirement to operate?
a) High revenue
b) Membership
c) Qualifications & solvency
d) Low premium
Q5. Why called bankers of insurance?
a) Profit focus
b) Individual coverage
c) Financial support role
d) Unlimited liability
Q6. Higher credit risk in recoverables due to?
a) Overstated risk
b) Low risk
c) Understated standards
d) No standards
Q7. Credit ratings are developed by?
a) Political factors
b) Competitors
c) Weather data
d) Reliable data sources
Q8. Multi-trigger cover means?
a) One trigger
b) Multiple triggers
c) No triggers
d) Unlimited triggers
Q9. Ceding commission after first year?
a) Fixed
b) Decreases
c) Increases
d) Redeemed
Q10. Clients expect from brokers?
a) Traditional cover
b) Weak balance sheet
c) Securitization
d) Best price & terms
Q11. Requirement for inward reinsurance success?
a) US focus
b) Small business
c) Strategy & infrastructure
d) Ignore market
Q12. Purpose of retrocession?
a) Increase offers
b) Reduce confidence
c) Retain business
d) Support in hard market
Q13. Regulators seek?
a) Profit summary
b) Underwriting process
c) Organization structure
d) Marketing plans
Q14. Need for catastrophe preparation?
a) Profit
b) More coverage
c) Policyholder funds
d) Protect shareholders
Q15. Clause for same premium rate?
a) Only (i)
b) Only (ii)
c) Both (i) & (ii)
d) None
Q16. Shock absorber comparison refers to?
a) Banking
b) Reinsurance
c) Gold
d) Investment
Q17. Self-insurer group is called?
a) Risk retention group
b) Self insurance
c) Pool
d) Captive
Q18. Catastrophe insurance covers?
a) Natural only
b) Human only
c) Both
d) None
Q19. Reinsurers are seen as?
a) Intermediaries
b) Exploiters
c) Financiers
d) Price makers
Q20. Underwriting year basis applies to?
a) Fire proportional
b) Fire non-proportional
c) Marine proportional
d) Marine non-proportional
