Reinsurance Support MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Reinsurance Support, a fundamental topic in the field of IC 92 Actuarial Aspects of Product Development. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Reinsurance Support MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Reinsurance Support mcq questions that explore various aspects of Reinsurance Support problems. Each MCQ is crafted to challenge your understanding of Reinsurance Support principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 92 Actuarial Aspects of Product Development tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Reinsurance Support MCQs are your pathway to success in mastering this essential IC 92 Actuarial Aspects of Product Development topic.

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Reinsurance Support MCQs | Page 1 of 8

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Q1.
Why does an insurer need reinsurance?

a.

To insure only those risks it can accept within its own limits

b.

To mitigate the risk of very large losses from catastrophic events

c.

To increase its profit margins

d.

To avoid insuring connected risks

Discuss
Answer: (b).To mitigate the risk of very large losses from catastrophic events Explanation:Reinsurance helps insurers mitigate the risk of very large losses resulting from catastrophic events such as massive explosions or terrorist attacks, which may not be insurable by a single insurer alone.
Q2.
What is reinsurance?

a.

An arrangement where insurers share profits

b.

A contract between insurers and policyholders

c.

An agreement where a reinsurer indemnifies an insurer against part or all of the liability assumed under insurance policies

d.

A method to avoid paying claims

Discuss
Answer: (c).An agreement where a reinsurer indemnifies an insurer against part or all of the liability assumed under insurance policies Explanation:Reinsurance is an arrangement where a reinsurer agrees to indemnify an insurer against part or all of the liability assumed under insurance policies in exchange for a premium.
Q3.
In a reinsurance treaty, what is the role of the direct insurer?

a.

To pay premiums to the reinsurer

b.

To bear all the risk associated with the policy

c.

To retain a fixed amount of cover per life

d.

To underwrite the entire policy

Discuss
Answer: (c).To retain a fixed amount of cover per life Explanation:In a reinsurance treaty, the direct insurer retains a fixed amount of cover per life, while the excess amount is passed on to the reinsurer.
Q4.
What happens if the total amount of cover exceeds the Facultative Limit in reinsurance?

a.

The reinsurer pays the excess amount to the direct insurer

b.

The direct insurer retains all the excess cover

c.

The reinsurer examines and underwrites before the insurer grants cover to the policyholder

d.

The insurer cancels the excess cover

Discuss
Answer: (c).The reinsurer examines and underwrites before the insurer grants cover to the policyholder Explanation:If the total amount of cover exceeds the Facultative Limit in reinsurance, the reinsurer examines and underwrites before the insurer is allowed to grant cover to the policyholder.
Q5.
What action does the re-insurer take if the insurance cover per life is below the Facultative Limit (F)?

a.

Automatically accept without any question

b.

Reject the application for reinsurance

c.

Examine and inspect the insurer's offices to assess underwriting practices

d.

Negotiate with the insurer for higher premiums

Discuss
Answer: (c).Examine and inspect the insurer's offices to assess underwriting practices Explanation:If the insurance cover per life is below the Facultative Limit (F), the re-insurer retains the right to examine and inspect the insurer's offices to assess underwriting practices within the company.
Q6.
What is the excess of total cover (T) over the retention amount (X) referred to as?

a.

Reinsurance premium

b.

Cession amount/cover

c.

Treaty limit

d.

Underwriting reserve

Discuss
Answer: (b).Cession amount/cover Explanation:The excess of total cover (T) over the retention amount (X) is referred to as cession amount/cover in reinsurance terminology.
Q7.
What condition might the re-insurer specify regarding the minimum cession amount?

a.

The cession amount should be equal to the retention amount

b.

The cession amount should be below the Facultative Limit

c.

The cession amount should exceed a specified minimum amount

d.

The cession amount should be equal to the premium paid

Discuss
Answer: (c).The cession amount should exceed a specified minimum amount Explanation:The re-insurer might specify a condition that the minimum cession amount should exceed a specified minimum amount, say Y, for each life insured.
Q8.
Why are reinsurance premium rates generally lower than those charged by the insurer?

a.

Because reinsurers work on different scale and assumptions

b.

Because reinsurers have higher operating costs

c.

Because reinsurers face higher risks

d.

Because reinsurers have lower capital reserves

Discuss
Answer: (a).Because reinsurers work on different scale and assumptions Explanation:Reinsurance premium rates are generally lower than those charged by the insurer because reinsurers work on different scales and assumptions compared to direct insurers.
Q9.
What is one of the terms for terminating a reinsurance treaty?

a.

Early closure penalty

b.

No termination allowed

c.

Automatic renewal

d.

Increased coverage limit

Discuss
Answer: (a).Early closure penalty Explanation:One of the terms for terminating a reinsurance treaty is the possibility of a penalty for early closure.
Q10.
When could disputes arise between the insurer and the re-insurer?

a.

During the underwriting process

b.

During premium negotiations

c.

During the settlement of claims

d.

During the policy issuance

Discuss
Answer: (c).During the settlement of claims Explanation:Disputes between the insurer and the re-insurer could arise during the settlement of claims, especially if the insurer fails to provide the requisite information requested by the re-insurer.
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