Question

How does contingent capital function in risk financing?

a.

It acts as a loan agreement with a bank for raising capital

b.

It guarantees the right to raise equity or loan capital after an insurance event

c.

It provides insurance coverage against rare but severe loss events

d.

It complies with solvency margins for direct insurers

Posted under IC85 Reinsurance Management

Answer: (b).It guarantees the right to raise equity or loan capital after an insurance event Explanation:Contingent capital in its simplest form is similar to a loan agreement with a bank, but with the condition that the policyholder has the right to raise equity or loan capital at agreed terms if a contractually defined insurance event occurs. This ensures that capital can be raised after the event to sustain business operations.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. How does contingent capital function in risk financing?
Add Comment

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. What is a variant to the assurance of contingent capital?

View solution

Q. Why are contingent capital solutions popular with direct insurers?

View solution

Q. What is the main idea behind a Finite Risk program?

View solution

Q. What is the characteristic of premium payments in a Finite Risk program?

View solution

Q. How are finite risk solutions typically written?

View solution

Q. What is the role of investment income in premium calculation for Finite Risk programs?

View solution

Q. What is the concern raised by critics regarding finite risk or nontraditional insurance products?

View solution

Q. What is the requirement for a reinsurance contract to be considered as reinsurance for accounting purposes?

View solution

Q. What is the "10-10 rule" regarding risk transfer?

View solution

Q. What is the primary objective of financial reinsurance?

View solution

Q. How is financial reinsurance different from finite reinsurance?

View solution

Q. What does the ceding insurer receive in financial reinsurance?

View solution

Q. How is the amount of ceding commission determined in financial reinsurance?

View solution

Q. What does the ceding insurer appropriate the ceding commission for in financial reinsurance?

View solution

Q. What type of risk transfer is involved in financial reinsurance?

View solution

Q. Where is financial reinsurance often used as a means to increase solvency margin?

View solution

Q. What are the charges included in the risks covered by financial reinsurance?

View solution

Q. What does the ceding commission contribute to in financial reinsurance?

View solution

Q. When is financial reinsurance considered a useful tool?

View solution

Q. How long does a financial reinsurance contract typically last?

View solution
View All MCQs on IC85 Reinsurance Management

Recommended Subjects

Are you eager to expand your knowledge beyond IC85 Reinsurance Management? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!

Biochemical Engineering

Master the synergy of biology and engineering with our Biochemical Engineering...

Fluid Mechanics

Unlock the mysteries of fluids and their behavior with our Fluid Mechanics category....

Automotive Engine Design

Embark on a thrilling exploration of Automotive Engine Design, where the intricacies...

Virology

Explore the captivating world of Virology with our specialized category. Dive into...

Corrosion Engineering

Master the art of preventing material deterioration with our Corrosion Engineering...

Civil Engineering

Dive into the world of Civil Engineering with our specialized category. Explore the...

IC22 Life Insurance Underwriting

Prepare for success in the Insurance Institute of India (III) examination with IC22...

Cytogenetics

Delve into the genetic mysteries of chromosomes with our Cytogenetics category....

Concrete Technology

Welcome to Concrete Technology, a category that unravels the secrets behind the...