IC85 Mock Test Sample 8
Reinsurance helps insurance companies manage large risks, stabilize profits, and improve financial security. Different clauses such as downgrade clause, access to records clause, and loss occurrence clause define the responsibilities of reinsurers and ceding insurers. Exchange rates, treaty structures, and premium calculations are important in international reinsurance agreements. Professional reinsurers and underwriting syndicates provide specialized support to insurers. Reinsurance agreements also include provisions for claims cooperation, retrocession, and treaty cancellation methods. Financial information, administrative procedures, and catastrophe risks are carefully reviewed to ensure proper underwriting, compliance, and efficient risk sharing in global insurance and reinsurance markets.
Q1. Which clause allows the reinsured to cancel the contract if the reinsurer is downgraded?
a) PML Excess Clause
b) Downgrade Clause
c) Loss Occurrence Clause
d) Original Condition Clause
Q2. Which statement regarding rate of exchange is correct?
a) Exchange rates may differ for the same country
b) Ceding insurer may revert to original currencies in major currency changes
c) Treaty currency is usually the domestic currency of the ceding insurer
d) All of these
Q3. Brokerage is determined separately in which business type?
a) Fire and accident proportional reinsurance
b) Fire and accident non-proportional reinsurance
c) Marine proportional reinsurance
d) Marine non-proportional reinsurance
Q4. The entire insurance loss including deductibles but net of salvage is called:
a) Ultimate net loss
b) Ground up loss
c) Gross loss
d) Total loss
Q5. Who are interested in financial information of insurers?
a) Shareholders and employees
b) Government and taxation authorities
c) Analysts and competitors
d) All of these
Q6. What is a solution for avoiding wide fluctuations of profits?
a) Accept premium reciprocity
b) Avoid premium reciprocity completely
c) Avoid large premium reciprocity from low profitability treaties
d) Avoid large premium reciprocity from high profitability treaties
Q7. In absence of reinsurance, claim fluctuations may cause:
a) Fall in premium rates
b) Increase in tax rates
c) Increase in premium rates
d) Increase in income rates
Q8. What is the purpose of the Access to Record Clause?
a) Allow reinsurer to inspect records
b) Rectify errors automatically
c) Protect against omissions
d) None of these
Q9. Retrocession shares allocated to members are fixed:
a) Every year
b) Once in two years
c) Once in five years
d) Once in seven years
Q10. Which copy is sent for stamping in India?
a) Ceding insurer’s copy
b) Broker’s copy
c) Both foreign copies
d) Reinsurer’s copy
Q11. In Fire and Accident Proportional Reinsurance, premiums are shown at:
a) Original gross rates
b) Underwriting year basis
c) Non-proportional basis
d) Overriding commission
Q12. Which method allows cessations to run to natural expiry after treaty cancellation?
a) Portfolio transfer method
b) Clean cut method
c) Natural expiry method
d) Renewal method
Q13. Bermuda became a reinsurance hub mainly because of:
a) Strict regulations
b) Tax incentives
c) Access to insurance market
d) Operational freedoms
Q14. What technology is mainly used at Lloyd’s settlements?
a) Manual settlements
b) Weekly settlements
c) Electronic Data Interchange (EDI)
d) Paper settlements
Q15. Credit ratings do NOT address:
a) Debt obligations
b) Investment diversity
c) Market share
d) Customer service quality
Q16. Reinsurance treaty acceptances should be reviewed:
a) Monthly
b) Annually
c) Semi-annually
d) Quarterly
Q17. Business review and claims procedures mainly influence:
a) Salary
b) Administrative efficiency
c) Marketing strategy
d) Delegated authority
Q18. Specialized reinsurance companies are called:
a) Direct insurers
b) Professional reinsurers
c) Risk pools
d) Local insurers
Q19. Loss occurrence clause helps determine:
a) Deductible amount
b) Maximum liability
c) Area limitation
d) Duration and extent of loss occurrence
Q20. Under Claims Cooperation Clause, liability depends on:
a) Regular claim reports
b) Court approval
c) Advance payment
d) Immediate notification to lead reinsurer
