Financial Regulatory Aspects of Solvency Margin and Investments MCQs

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Financial Regulatory Aspects of Solvency Margin and Investments MCQs | Page 4 of 6

Discover more Topics under IC 14 Regulations of Insurance Business

Q31.
According to the Indian Regulations outlined, what is the minimum percentage requirement for investments in Central Government Securities?

a.

20%

b.

30%

c.

5%

d.

10%

Discuss
Answer: (a).20% Explanation:According to the Indian Regulations specified, the minimum percentage requirement for investments in Central Government Securities is not less than 20%.
Q32.
What is the minimum percentage requirement for investments in Government securities and other Guaranteed securities, including Central Government Securities?

a.

20%

b.

30%

c.

5%

d.

10%

Discuss
Answer: (b).30% Explanation:The minimum percentage requirement for investments in Government securities and other Guaranteed securities, including Central Government Securities, is not less than 30%.
Q33.
Which of the following statements regarding insurance accounting is NOT correct?

a.

Premium is recognized as income over the contract period or the period of risk.

b.

Premium received in advance not relating to the current accounting period should be disclosed separately under the head "Current Liabilities".

c.

Acquisition costs are recognized in the period in which they are incurred.

d.

Claims under policies do not include those estimated or anticipated following a loss occurrence.

Discuss
Answer: (d).Claims under policies do not include those estimated or anticipated following a loss occurrence. Explanation:Claims under policies comprise the claims made for losses incurred, and those estimated or anticipated under the policies following a loss occurrence. Therefore, claims under policies do include those estimated or anticipated following a loss occurrence.
Q34.
What are the three exceptions in general accounting standards for insurers carrying on general insurance business?

a.

Cash Flow Statement to be prepared only under Direct Method

b.

Accounting for Investments is not applicable

c.

Segment Reporting applies to all insurers

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The exceptions in general accounting standards for insurers carrying on general insurance business include preparing the Cash Flow Statement only under the Direct Method, not applying Accounting for Investments, and applying Segment Reporting to all insurers.
Q35.
How should premium be recognized as income?

a.

Premium should be recognized as income at the end of the contract period

b.

Premium should be recognized as income at the end of the financial year

c.

Premium should be recognized as income over the contract period or the period of risk

d.

Premium should be recognized as income immediately upon receipt

Discuss
Answer: (c).Premium should be recognized as income over the contract period or the period of risk Explanation:Premium should be recognized as income over the contract period or the period of risk, as per insurance accounting standards. Premium received in advance not relating to the current accounting period should be disclosed separately under the head "Current Liabilities."
Q36.
When should premium reserve for unexpired risks be created?

a.

Premium reserve for unexpired risks should be created at the end of the financial year

b.

Premium reserve for unexpired risks should be created immediately upon receipt of premium

c.

Premium reserve for unexpired risks should be created over the contract period or the period of risk

d.

Premium reserve for unexpired risks is not required

Discuss
Answer: (c).Premium reserve for unexpired risks should be created over the contract period or the period of risk Explanation:Premium reserve for unexpired risks should be created over the contract period or the period of risk, as per insurance accounting standards.
Q37.
How should acquisition costs be accounted for?

a.

Acquisition costs should be placed in the period in which they are incurred

b.

Acquisition costs should be placed at the end of the financial year

c.

Acquisition costs should not be accounted for

d.

Acquisition costs should be capitalized

Discuss
Answer: (a).Acquisition costs should be placed in the period in which they are incurred Explanation:Acquisition costs should be placed in the period in which they are incurred, according to insurance accounting standards.
Q38.
What does the liability for outstanding claims include?

a.

Only future payments in relation to unpaid reported claims

b.

Only Claims Incurred But Not Reported (IBNR)

c.

Both future payments in relation to unpaid reported claims and Claims Incurred But Not Reported (IBNR)

d.

Neither future payments nor Claims Incurred But Not Reported (IBNR)

Discuss
Answer: (c).Both future payments in relation to unpaid reported claims and Claims Incurred But Not Reported (IBNR) Explanation:The liability for outstanding claims includes both future payments in relation to unpaid reported claims and Claims Incurred But Not Reported (IBNR), among other factors, according to insurance accounting standards.
Q39.
What should the accounting estimates for claims cost include?

a.

Only claims made for losses incurred

b.

Only estimated or anticipated claims under the policies following a loss occurrence

c.

Only claims incurred under policies and specific claims settlement costs

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The accounting estimates for claims cost should include claims made for losses incurred, estimated or anticipated claims under policies following a loss occurrence, and specific claims settlement costs, according to insurance accounting standards.
Q40.
How are loans typically measured?

a.

Loans are measured at fair value

b.

Loans are measured at market value

c.

Loans are measured at historical cost

d.

Loans are measured at present value

Discuss
Answer: (c).Loans are measured at historical cost Explanation:Loans are typically measured at historical cost according to insurance accounting procedures.
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