IC85 Mock Test Sample 18
Reinsurance supports insurers by spreading risks, stabilizing profits, and improving financial security. Concepts such as retrocessional support, sliding scale commission, inward reinsurance, portfolio transfer, profit commission, and liability adequacy testing are essential in treaty management. Global markets like Bermuda, Lloyd’s China, and GIC Re play important roles in international reinsurance. Credit ratings, MIS support, and technical expertise help evaluate inward business quality. IFRS regulations guide reporting and impairment testing of reinsurance assets. Reinsurance contracts such as spread loss and double-trigger policies provide innovative risk protection solutions. Strong corporate objectives and professional reputation continue to influence reinsurer selection worldwide.
Q1. Judge which of the following statements is valid:
(i) Presence of retrocessional support influences the rate quoted by lead underwriter
(ii) Presence of suitable MIS support influences the rate quoted by lead underwriter
(iii) Absence of suitable MIS support influences the rate quoted by lead underwriter
(iv) Absence of retrocessional support influences the rate quoted by lead underwriter
a) Only I
b) Only II
c) Both II and III
d) Only IV
Q2. PQR Ltd. wants explanation regarding Sliding Scale Commission.
a) Sliding scale commission is always consistent in all respects
b) Consistent for all agreements but differs by business and country
c) Varies from agreement to agreement and also by business and country
d) Consistent for all businesses but differs by agreement and country
Q3. If a treaty reinsurance agreement is between two Indian companies, who gets the document stamped?
a) Foreign reinsurer
b) Broker
c) Local government
d) Indian ceding insurer
Q4. What percentage of world reinsurance premiums were written in Bermuda in 2010?
a) 5%
b) 10%
c) 16%
d) 25%
Q5. When was Lloyd’s China established?
a) 2000
b) 2005
c) 2007
d) 2010
Q6. What helps in determining the quality of inward reinsurance offers?
a) Accumulation risks
b) Exchange losses
c) Focus on free markets
d) Credit rating and first-hand information
Q7. In which country was Swiss Reinsurance Company established?
a) Germany
b) Switzerland
c) England
d) France
Q8. Which overseas markets are actively targeted by GIC Re for inward reinsurance?
a) New York and Hong Kong
b) London and Dubai
c) Singapore and Mumbai
d) Tokyo and Shanghai
Q9. Why are accounts divided into technical and financial accounts?
a) To simplify account handling
b) To conform to international regulations
c) To show balances due to reinsurers
d) To display reinsurer’s share of technical results
Q10. In accounting year profit commission, which transactions are included?
a) Transactions of same treaty period without underwriting year reference
b) All transactions for same underwriting year
c) Transactions without regard to any period
d) Transactions of same calendar year
Q11. What is the purpose of portfolio transfer or clean cut method?
a) Increase reinsurers on treaty
b) Allow multiple accounts on cancellation
c) Simplify transition and reduce administrative work
d) Lower administrative costs only
Q12. When is adjustment account based on actual premium income prepared?
a) Immediately after inception
b) Quarterly during year
c) At end of accounting year when premium is known
d) Only during significant losses
Q13. According to IFRS, Liability Adequacy Test is used to:
a) Reduce reinsurance liabilities
b) Eliminate reinsurance assets
c) Decrease adequacy of liabilities
d) Test impairment of reinsurance assets
Q14. Where is a reinsurer liable to income tax on worldwide profit?
a) Country of incorporation only
b) Country of head office only
c) Every country of operation
d) Countries with double taxation agreements
Q15. Successful insurance and reinsurance companies focus on:
a) Short-term mitigation of risk
b) Rapid disappearance of syndicates
c) Annual account-specific reinsurance
d) Corporate value and achievement of objectives
Q16. What role does Lloyd’s China play?
a) Provides insurance to individuals
b) Promotes international trade in services
c) Supervises all insurance companies in China
d) Operates as insurer in Chinese market
Q17. Traditionally, what influenced selection of reinsurers?
a) Regulatory requirements
b) Professional reputation and technical support
c) Portfolio size
d) Broker commission rates
Q18. What is the role of National Scale Ratings?
a) Assess global market reach
b) Evaluate regulatory compliance
c) Compare insurers with non-insurance firms
d) Assess insurer’s financial strength in home market
Q19. What is an example of a double-trigger policy?
a) Natural disaster policy
b) Personal injury policy
c) Equipment failure policy
d) Storm-related damage policy
Q20. What is the primary purpose of spread loss reinsurance contracts?
a) Reinsurance for catastrophic events
b) Reduce insurer’s overall risk exposure
c) Protect insurer’s credit risk
d) Protection for short-tail claims
