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.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Reinsurance Support. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Reinsurance Support knowledge to the test? Let's get started with our carefully curated MCQs!

Reinsurance Support MCQs | Page 3 of 8

Discover more Topics under IC 92 Actuarial Aspects of Product Development

Q21.
What is a primary consideration for insurers before reinsuring?

a.

Maximizing profits

b.

Minimizing capital requirements

c.

Evaluating the cost of reinsurance

d.

Ignoring risk reduction

Discuss
Answer: (c).Evaluating the cost of reinsurance Explanation:Insurers should evaluate the cost of reinsurance, considering the reinsurer's profit, cost of capital, and expenses, as it impacts the expected absolute level of profit for the insurer.
Q22.
How do retention limits influence the decision to reinsure?

a.

By decreasing regulatory capital requirements

b.

By minimizing familiarity with underwriting

c.

By increasing profit-sharing arrangements

d.

By impacting the stability of free asset ratio

Discuss
Answer: (d).By impacting the stability of free asset ratio Explanation:Retention limits influence the decision to reinsure by impacting the stability of the insurer's free asset ratio, among other factors such as insurance risk appetite, free assets level, and regulatory capital requirements.
Q23.
What factors should be considered when setting retention limits for reinsurance?

a.

Expected profit levels only

b.

Regulatory compliance only

c.

Various general factors

d.

Profit-sharing arrangements only

Discuss
Answer: (c).Various general factors Explanation:General factors to consider when setting retention limits for reinsurance include average benefit level, insurance risk appetite, free assets level, regulatory capital requirements, profit-sharing arrangements, and other relevant considerations.
Q24.
What is the key decision in determining the level of retention limits for insurers?

a.

Maximizing risk

b.

Minimizing profits

c.

Setting limits based on familiarity

d.

Setting limits to maximize expected profit while considering all risks

Discuss
Answer: (d).Setting limits to maximize expected profit while considering all risks Explanation:The key decision in determining the level of retention limits for insurers is to set limits at a level where the expected profit is highest after considering all risks involved.
Q25.
How does reinsurance impact the return on capital for insurers?

a.

It decreases the return on capital

b.

It has no impact on return on capital

c.

It increases the return on capital

d.

It reduces the cost of reinsurance

Discuss
Answer: (c).It increases the return on capital Explanation:Reinsurance may leverage up the return or risk-adjusted return on capital for insurers by reducing risk, potentially increasing the return on capital.
Q26.
What term describes the situation where an insurer remains liable to policyholders even if the reinsurer becomes insolvent?

a.

Reinsurance risk

b.

Counterparty risk

c.

Credit risk

d.

Legal risk

Discuss
Answer: (b).Counterparty risk Explanation:Counterparty risk refers to the situation where the insurer retains liability to policyholders even if the reinsurer becomes insolvent and unable to meet claim payments as they become due.
Q27.
How can the exposure to counterparty risk be mitigated?

a.

By increasing exposure to the reinsurer

b.

By reducing the need for collateral

c.

By implementing defined actions based on credit ratings

d.

By avoiding reinsurance arrangements altogether

Discuss
Answer: (c).By implementing defined actions based on credit ratings Explanation:Exposure to counterparty risk can be mitigated by implementing defined actions, such as reducing the amount of reinsurance ceded to any reinsurer whose credit rating falls below a specified level.
Q28.
What legal framework governs reinsurance agreements?

a.

Regulatory law

b.

Contract law

c.

Common law

d.

Statutory law

Discuss
Answer: (b).Contract law Explanation:Reinsurance agreements are governed by contract law, as they are formal legal contracts between the insurance company and the reinsurer, outlining rights, responsibilities, and terms of payment.
Q29.
Why is achieving contract certainty important in reinsurance agreements?

a.

To avoid regulatory scrutiny

b.

To reduce legal risk

c.

To minimize credit risk

d.

To increase exposure to reinsurers

Discuss
Answer: (b).To reduce legal risk Explanation:Achieving contract certainty in reinsurance agreements is important to reduce legal risk, as it ensures that the responsibilities of the parties involved are clearly defined, potentially avoiding disputes and legal issues.
Q30.
What is the focus of regulators regarding reinsurance treaties?

a.

Increasing the complexity of treaties

b.

Ensuring timely payment of claims

c.

Enforcing standardized terms

d.

Ensuring completeness and signing of treaties

Discuss
Answer: (d).Ensuring completeness and signing of treaties Explanation:Regulators around the world are increasingly focused on ensuring the completeness and signing of reinsurance treaties to mitigate risks and promote transparency in the reinsurance market.
Page 3 of 8