Reinsurance MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Reinsurance, a fundamental topic in the field of IC22 Life Insurance Underwriting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Reinsurance 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 mcq questions that explore various aspects of Reinsurance problems. Each MCQ is crafted to challenge your understanding of Reinsurance principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC22 Life Insurance Underwriting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Reinsurance MCQs are your pathway to success in mastering this essential IC22 Life Insurance Underwriting topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Reinsurance. 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 knowledge to the test? Let's get started with our carefully curated MCQs!

Reinsurance MCQs | Page 1 of 9

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Q1.
What is reinsurance?

a.

The transfer of risk from the reinsurer to the ceding company

b.

The transfer of risk from the ceding company to the reinsurer

c.

The transfer of risk from the insurer to the policyholder

d.

The transfer of risk from the policyholder to the insurer

Discuss
Answer: (b).The transfer of risk from the ceding company to the reinsurer Explanation:Reinsurance is the transfer of risk from the ceding company (direct insurance company) to the reinsurer (another insurance company).
Q2.
What is the role of the ceding company in reinsurance?

a.

To assume the role of the insurer

b.

To transfer part of the risk to the reinsurer

c.

To earn commission for passing on the business

d.

To protect its balance sheet

Discuss
Answer: (b).To transfer part of the risk to the reinsurer Explanation:The ceding company's role in reinsurance is to transfer part of the risk to the reinsurer.
Q3.
What is the role of the reinsurer in reinsurance?

a.

To assume the role of the insurer

b.

To transfer part of the risk to the ceding company

c.

To earn commission for passing on the business

d.

To protect its balance sheet

Discuss
Answer: (a).To assume the role of the insurer Explanation:In reinsurance, the reinsurer assumes the role of the insurer and accepts the transfer of risk from the ceding company.
Q4.
Why do insurers use reinsurance?

a.

To refuse business they can't handle

b.

To reduce their liability in unforseen events

c.

To earn commission for passing on the business

d.

To transfer risk from the policyholder to the insurer

Discuss
Answer: (b).To reduce their liability in unforseen events Explanation:Insurers use reinsurance to protect their balance sheet and reduce their liability in unforseen events by transferring part of the risk to the reinsurer.
Q5.
Where are most reinsurers based?

a.

In India

b.

Outside India

c.

In the GIC

d.

In the national reinsurer

Discuss
Answer: (b).Outside India Explanation:Except for the GIC, all other reinsurers are currently based outside India.
Q6.
Who is the ceding company in a reinsurance transaction?

a.

The reinsurer

b.

The policyholder

c.

The direct insurance company transferring the risk

d.

The insurance company assuming the risk

Discuss
Answer: (c).The direct insurance company transferring the risk Explanation:The ceding company is the direct insurance company that transfers a portion of its risk to the reinsurer.
Q7.
What is the role of a reinsurer in a reinsurance transaction?

a.

To assume the risk transferred by the ceding company

b.

To sell insurance policies to policyholders

c.

To provide commission to the ceding company

d.

To transfer the risk to another insurance company

Discuss
Answer: (a).To assume the risk transferred by the ceding company Explanation:The reinsurer assumes the risk transferred by the ceding company, thereby reducing the liability of the direct insurer.
Q8.
Why would an insurer transfer a portion of its risk to a reinsurer?

a.

To protect its balance sheet in the event of a major loss

b.

To increase its liability in case of a major loss

c.

To decrease its liability in case of a minor loss

d.

To earn a higher commission on the insurance sale

Discuss
Answer: (a).To protect its balance sheet in the event of a major loss Explanation:The insurer transfers a portion of its risk to a reinsurer to protect its balance sheet in the event of a major loss that it may not have the capacity to cope with.
Q9.
What is the purpose of commission earned by the insurer in a reinsurance transaction?

a.

To compensate for business development and acquisition costs

b.

To increase the amount of risk transferred to the reinsurer

c.

To decrease the amount of risk retained by the insurer

d.

To increase the premium charged to the policyholder

Discuss
Answer: (a).To compensate for business development and acquisition costs Explanation:The commission earned by the insurer in a reinsurance transaction compensates for its business development and acquisition costs associated with the transfer of risk to the reinsurer.
Q10.
Which of the following statements is true about reinsurance?

a.

Reinsurance transfers part of the risk to another insurance company.

b.

Reinsurance is the insurance of insurance.

c.

Reinsurance cannot be done for life insurance.

d.

Both a and b

Discuss
Answer: (d).Both a and b Explanation:Reinsurance is the way in which one direct insurance company transfers part of the risk to another insurance company (the reinsurer). This helps to reduce the liability of the direct insurer to a large extent.
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