IC85 Mock Test Sample 9

Q1. What is the primary purpose of profit commission in reinsurance?

a) To reimburse the reinsurer's expenses
b) To calculate the overriding commission
c) To incentivize ceding insurers to produce profitable business
d) To reduce the original commission

Q2. How is the minimum and deposit premium usually paid?

a) Lump sum at the beginning of the year
b) Quarterly installments
c) Subject to deductions for losses
d) Based on profit commission

Q3. What is the primary aim of converging Indian accounting standards with IFRS?

a) To increase reinsurance premiums
b) To create multiple reports
c) To make standards stringent
d) To enhance the ability to attract foreign capital

Q4. What is an enlightened fiscal attitude toward reinsurers?

a) Imposing higher taxes
b) Allowing unlimited reserves
c) Reducing profitability
d) Understanding reinsurance and allowing tax-free reserves

Q5. What impact has consolidation had on reinsurance demand?

a) Increased annual account-specific demand
b) Decreased all demand
c) Increased reliance on alternative risk financing
d) Reduced insurers and reinsurers

Q6. What is GIC Re’s objective in overseas inward reinsurance?

a) Dominate Europe
b) Reduce developed market presence
c) Serve only Middle East countries
d) Establish presence in Middle East, Soviet block, and Far East

Q7. How can managing reinsurance security leverage profits?

a) Avoid all credit risks
b) Focus only on ratings
c) Reduce investments
d) Offset higher credit risk with lower risk assets

Q8. What is the feature of a multi-trigger cover?

a) Combines all events into one
b) Eliminates premiums
c) Allows unlimited triggers
d) Pays claims based on multiple trigger events

Q9. What do regulators often accept to strengthen insurers’ capital?

a) High investment returns
b) Foreign investments
c) Subordinated loan and financial reinsurance
d) Reduced capital requirements

Q10. What creates constant demand on brokers?

a) Focus on one solution
b) Expertise in one area
c) Exclusive traditional products
d) Expertise to help clients quantify risks

Q11. Why is intimate market knowledge essential in inward reinsurance?

a) Attract low-quality business
b) Increase business volume
c) Minimize acceptance costs
d) Restrict adverse acceptances

Q12. When should underwriting positions be advised through retrocession schedules?

a) No retrocession exists
b) Lead underwriter accepts net lines
c) Market is soft
d) Retrocession arrangements are in place

Q13. Why should underwriters know catastrophic accumulation dangers?

a) Maximize profits
b) Eliminate reinsurance
c) Reduce premiums
d) Modify underwriting policy accordingly

Q14. What is the primary purpose of reinsurance?

a) Maximize insurer profits
b) Additional policyholder coverage
c) Insulate shareholders’ funds from unpredictable losses
d) Remove regulations

Q15. Which clause protects against delays, errors, or omissions?

a) Operative clause
b) Errors and Omissions
c) Access to records
d) Alterations

Q16. Which body regulates insurance growth in India?

a) SEBI
b) ADB
c) IRDA
d) NAIC

Q17. What are written agreements between ceding insurer and reinsurer called?

a) Reinsurance contracts
b) Treaty wordings
c) Slips
d) Cover notes

Q18. A mutual group sharing retained risk is known as:

a) Risk Retention Group
b) Self Insurance
c) Pool
d) Captive

Q19. What is the responsibility nature of an intermediary?

a) Partial responsibility
b) No responsibility
c) Multiple responsibilities
d) Dual responsibility

Q20. An insurer wholly owned by sponsors for insuring and reinsuring risks is called:

a) Self-insurance
b) Captive
c) Pool
d) Risk retention group