IC85 Mock Test Sample 19
Reinsurance helps insurers stabilize earnings, reduce volatility, and strengthen financial security. Brokers assist clients by modeling coverage options and evaluating their financial impact. Hard and soft market conditions influence retrocessional support and reinsurance pricing. Accurate statistics, claims monitoring, and treaty reviews are essential for effective reinsurance management. The Law of Large Numbers improves prediction accuracy in insurance. Reciprocal trading, inward retrocession, and excess of loss arrangements are important reinsurance practices. International agencies such as MIGA support cross-border investments through political risk insurance. Reinsurance accounting enables informed financial decisions, while concentration of risks across classes and regions must always be carefully reduced.
Q1. How do brokers help clients reduce volatility and strengthen balance sheets?
a) By focusing on traditional reinsurance only
b) By reducing client options
c) By offering traditional reinsurance only
d) By modeling coverage options and assessing cost and impact
Q2. In which scenario do hard markets occur in retrocessional markets?
a) When there is overcapacity
b) When rates are low
c) When retrocession support is available
d) When there is scarcity of reinsurance offers
Q3. In a reinsurance treaty review, what does sudden increase or decrease in premium require?
a) Review of profit commission statements
b) Assessment of cash flows
c) Review with insurer or reinsurer concerned
d) Adjustment of cancellation notice period
Q4. What does a reinsurer primarily monitor regarding performance?
a) Premium rates in different countries
b) Exposures in various regions
c) Claims trends and provisions
d) Marketing strategies of ceding insurer
Q5. Why is maintenance of accurate statistics important in reinsurance?
a) To reduce operational costs
b) To satisfy regulations
c) To expedite claims processing
d) To ensure successful conduct of reinsurance business
Q6. How does the Law of Large Numbers affect probability of loss?
a) No relation to probability accuracy
b) Decreases accuracy
c) Increases accuracy
d) Applies only to life insurance
Q7. One advantage of reinsurance in loss distribution is that it:
a) Increases incidence of loss
b) Leads to significant accumulations
c) Has no impact on losses
d) Widely distributes incidence of loss
Q8. Reinsurance is a separate contract between whom?
a) Reinsurer & Insurer
b) Reinsurer & Underwriter
c) Insurer & Underwriter
d) Reinsurer, Insurer & Underwriter
Q9. Basic statistics relating to a treaty are collated from __________.
a) Bank Statements
b) Financial Statements
c) Account Statements
d) Actuarial Data
Q10. Reciprocal reinsurance trading is more often used in which business?
a) Fire insurance
b) Life insurance
c) Aviation insurance
d) Accident/Liability insurance
Q11. To whom does the balance loss above retention and XL cover limit revert?
a) Investigator
b) Broker
c) Reinsured
d) Insured
Q12. In inward retrocession, the reinsurer allows the ceding insurer __________.
a) Overriding commission
b) Brokerage
c) Profit commission
d) Flat rate commission
Q13. Which agency promotes cross-border investment through political risk insurance?
a) IFC
b) MIGA
c) ADB
d) WTO
Q14. Which information is NOT included while preparing reciprocal exchange summary sheets?
a) Adequacy of rate
b) Commissions
c) Incurred claims
d) Net results
Q15. Which is NOT a primary objective of reinsurance?
i) Limitation of liability within insurer capacity
ii) Ensuring competitive advantage
iii) Securing technical assistance
a) Only (i)
b) Only (ii)
c) Only (iii)
d) All (i), (ii) & (iii)
Q16. __________ is the process of identifying, measuring, and communicating financial information.
a) Reinsurance finance
b) Reinsurance accounting
c) Overriding commission
d) Flat rate commission
Q17. A reinsurer always wants to know who the underwriter is.
a) No, only for proportional reinsurance
b) No, invalid statement
c) Yes, valid statement
d) Depends on insurer intention
Q18. Brokers have started marketing enhanced services known as __________.
a) Risk Management Professionals
b) Dynamic Financial Analysis and Modelling
c) Composite companies
d) Captive companies
Q19. Categorize the term “Risk Excess”.
a) Operates on arrangement basis
b) Operates on non-proportional basis
c) Operates on proportional basis
d) Operates on singular basis
Q20. Concentration of risks in one class or geographic area must be:
a) Increased
b) Reduced
c) Minimized
d) Centered in one area only
