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 3 of 9

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Q21.
What is retrocession?

a.

The risk that gets ceded by the direct insurer

b.

The risk that gets ceded by the reinsurer

c.

The risk that gets accepted by the direct insurer

d.

The risk that gets accepted by the reinsurer

Discuss
Answer: (b).The risk that gets ceded by the reinsurer Explanation:The reinsurer may insure large sums with their reinsurers, known as "retrocessionaires", who accept the risks of reinsurers. The risk that gets ceded by the reinsurer is known as the "retrocession".
Q22.
What is the purpose of reinsurance arrangements?

a.

To increase the liability of the direct insurer

b.

To minimize the financial impact of death claims on the direct insurer

c.

To expose the direct insurer to more risks

d.

To eliminate the need for direct insurance companies

Discuss
Answer: (b).To minimize the financial impact of death claims on the direct insurer Explanation:Reinsurance arrangements help to minimize the financial impact of death claims on a direct insurer.
Q23.
What is the retention limit in reinsurance?

a.

The amount of premium paid by the direct insurer to the reinsurer

b.

The maximum amount of claims that a direct insurer can process in a year

c.

The quantum of liability which a direct insurance company takes on

d.

The total amount of loss that can be dissolved by reinsurers

Discuss
Answer: (c).The quantum of liability which a direct insurance company takes on Explanation:The retention limit is the quantum of liability which a direct insurance company takes on and is pre-decided and documented in the "reinsurance treaty".
Q24.
Why do insurers feel the need to insure risks through reinsurers?

a.

To increase their financial risks

b.

To eliminate the need for direct insurance companies

c.

To spread their financial risks to reinsurers

d.

To reduce their financial risks

Discuss
Answer: (c).To spread their financial risks to reinsurers Explanation:Reinsurance arrangements help small upcoming insurance companies to compete with bigger insurance companies by spreading their financial risks suitably to the reinsurers.
Q25.
What is a reinsurance treaty?

a.

A document that specifies the retention limit of the direct insurer

b.

A document that specifies the premium paid to the reinsurer

c.

A document that specifies the claim amount paid by the reinsurer

d.

A document that specifies the risks covered by the reinsurer

Discuss
Answer: (a).A document that specifies the retention limit of the direct insurer Explanation:A reinsurance treaty is a document that specifies the retention limit of the direct insurer and is pre-decided and documented in the "reinsurance treaty".
Q26.
What are some factors that are considered while fixing the retention limits?

a.

The size of the reinsurer and the number of clients it has

b.

The size of the direct insurer and its years of existence

c.

The number of reinsurance treaties the direct insurer has

d.

None of the above

Discuss
Answer: (b).The size of the direct insurer and its years of existence Explanation:Some of the factors on which the retention limits are fixed are the size of the company and its years of existence, the quality and experience of the underwriters, the surplus of the direct insurance company, and the quality of the business sourced by the distribution channels.
Q27.
What is retrocession?

a.

It is a process in which a reinsurer buys reinsurance from another reinsurer.

b.

It is a process in which a direct insurer buys reinsurance from a reinsurer.

c.

It is a process in which a reinsurer reinsures its risks with another reinsurer.

d.

It is a process in which a direct insurer reinsures its risks with another insurer.

Discuss
Answer: (c).It is a process in which a reinsurer reinsures its risks with another reinsurer. Explanation:Retrocession is a process in which a reinsurer reinsures its risks with another reinsurer.
Q28.
What is a retrocedent?

a.

The reinsurer that accepts the risk from another reinsurer.

b.

The insurer that buys reinsurance from a reinsurer.

c.

The reinsurer that transfers (cedes) the risk to another reinsurer.

d.

The insurer that transfers (cedes) the risk to a reinsurer.

Discuss
Answer: (d).The insurer that transfers (cedes) the risk to a reinsurer. Explanation:Retrocedent is the reinsurance company that transfers (cedes) the risk to another reinsurer.
Q29.
What is a retrocessionaire?

a.

The insurer that transfers (cedes) the risk to a reinsurer.

b.

The reinsurer that transfers (cedes) the risk to another reinsurer.

c.

The reinsurer that accepts the risk from another reinsurer.

d.

The insurer that buys reinsurance from a reinsurer.

Discuss
Answer: (c).The reinsurer that accepts the risk from another reinsurer. Explanation:Retrocessionaire is the reinsurance company that accepts the risk from another reinsurer.
Q30.
Who has the primary obligation to pay a claim in an insurance contract?

a.

The reinsurer

b.

The retrocedent

c.

The retrocessionaire

d.

The direct insurance company

Discuss
Answer: (d).The direct insurance company Explanation:The primary obligation to pay a claim in an insurance contract rests with the direct insurance company.
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