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 4 of 9

Discover more Topics under IC22 Life Insurance Underwriting

Q31.
What is the difference between an insurance contract and a reinsurance agreement?

a.

An insurance contract is between an insurer and a client, while a reinsurance agreement is between an insurer and a reinsurer.

b.

An insurance contract is between a reinsurer and a client, while a reinsurance agreement is between an insurer and a reinsurer.

c.

The financial obligation of the insurance contract rests with the reinsurer, while the financial obligation of the reinsurance agreement rests with the insurer.

d.

The claim payment is made by the reinsurer in an insurance contract, while the claim payment is made by the direct insurance company in a reinsurance agreement.

Discuss
Answer: (a).An insurance contract is between an insurer and a client, while a reinsurance agreement is between an insurer and a reinsurer. Explanation:The difference between an insurance contract and a reinsurance agreement is that an insurance contract is between an insurer and a client, while a reinsurance agreement is between an insurer and a reinsurer.
Q32.
Which of the following factors can influence a direct insurer's retention limit?

a.

The age of the direct insurer

b.

The size of the company

c.

The quality of the reinsurer

d.

The financial status of the reinsurer

Discuss
Answer: (b).The size of the company Explanation:Some of the factors that can influence a direct insurer's retention limit include 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.
Q33.
Which of the following statement is true regarding reinsurance agreement?

a.

The primary obligation to pay a claim rests with the reinsurer in a reinsurance agreement.

b.

The claim payment to the claimant is made by the reinsurer in an insurance contract.

c.

The reinsurance agreement is between the insurer and the customer, while the insurance contract is between the insurer and the reinsurer.

d.

The obligation to pay the full and legitimate claim rests with the direct insurance company in a reinsurance agreement.

Discuss
Answer: (d).The obligation to pay the full and legitimate claim rests with the direct insurance company in a reinsurance agreement. Explanation:The financial obligation of the insurance contract entered into by the insurer with the client rests with the direct insurance company and not the reinsurer. The primary obligation to pay a claim, whenever it happens, always rests with the insurance company. The reinsurance agreement, on the other hand, is between the insurer and the reinsurer, and the reinsurer makes the claim payment to the direct insurance company based on the terms of the reinsurance cession and the reinsurance treaty.
Q34.
How do reinsurance arrangements help small insurance companies compete with larger ones?

a.

By dissolving losses incurred by the direct insurer

b.

By transferring risks to the reinsurer

c.

By spreading their financial risks suitably to the reinsurers

d.

By accepting risks from another reinsurer

Discuss
Answer: (c).By spreading their financial risks suitably to the reinsurers Explanation:In a competitive environment, insurers feel the need for insuring risks through the reinsurers, especially when large covers are involved. Reinsurance arrangements help small, upcoming insurance companies to compete with larger insurance companies by spreading their financial risks suitably to the reinsurers.
Q35.
In retrocession, the reinsurance company that transfers the risk to another reinsurer is known as the

a.

Retrocedent

b.

Retrocessionaire

c.

lntrocedent

d.

lntrocessionaire

Discuss
Answer: (a).Retrocedent Explanation:Retrocession is a process in which a reinsurer reinsures its risks with another reinsurer. The reinsurance company that transfers the risk to another reinsurer is known as the Retrocedent. Retrocessionaire is the reinsurance company that accepts the risk from another reinsurer.
Q36.
What are the two major types of reinsurance?

a.

Treaty and Risk-based

b.

Facultative and Treaty

c.

Risk-based and Facultative

d.

Portfolio and Overall

Discuss
Answer: (b).Facultative and Treaty Explanation:Two major types of reinsurance - Facultative and Treaty.
Q37.
In which type of reinsurance is the risk assessed on an individual basis?

a.

Treaty

b.

Portfolio

c.

Facultative

d.

Risk-based

Discuss
Answer: (c).Facultative Explanation:In Facultative reinsurance, the risk is assessed on an individual basis.
Q38.
What information does the direct insurance company provide to the reinsurer in Facultative reinsurance?

a.

Detailed information on each case to be ceded

b.

Portfolio level information

c.

Summary information on each case to be ceded

d.

None of the above

Discuss
Answer: (a).Detailed information on each case to be ceded Explanation:In Facultative reinsurance, the direct company provides the reinsurer detailed information on each case to be ceded.
Q39.
Can the reinsurer propose a different underwriting decision in Facultative reinsurance?

a.

Yes

b.

No

c.

Can't say

d.

None of the above

Discuss
Answer: (a).Yes Explanation:In Facultative reinsurance, the reinsurer independently underwrites the risk and can propose a different underwriting decision, which is different from the one recommended by the direct insurance company.
Q40.
What happens if the reinsurer accepts the risk in Facultative reinsurance?

a.

The risk is transferred entirely to the reinsurer

b.

The risk is apportioned between the direct insurance company and the reinsurer

c.

The direct insurance company retains the entire risk

d.

None of the above

Discuss
Answer: (b).The risk is apportioned between the direct insurance company and the reinsurer Explanation:If the reinsurer accepts the risk in Facultative reinsurance, it is apportioned between the direct insurance company and the reinsurer based on certain criteria.
Page 4 of 9