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 6 of 9

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Q51.
What events are generally not covered under Catastrophe reinsurance?

a.

Natural disasters like tsunamis and earthquakes

b.

Wars

c.

Both a and b

d.

Catastrophe reinsurance covers all types of events

Discuss
Answer: (c).Both a and b Explanation:Catastrophe reinsurance generally does not cover mortality risks due to wars or natural disasters like tsunamis, earthquakes, volcanoes etc.
Q52.
Why is Catastrophe reinsurance purchased by a direct insurance company for a large block of individuals and not on an individual basis?

a.

Catastrophe reinsurance is too expensive for individual policies

b.

Catastrophe reinsurance only covers natural disasters

c.

Catastrophe reinsurance protects the company against the short-term earning impact of incurring multiple large claims at one time

d.

Catastrophe reinsurance is not applicable for individual policies

Discuss
Answer: (c).Catastrophe reinsurance protects the company against the short-term earning impact of incurring multiple large claims at one time Explanation:Catastrophe reinsurance protects the company against the short-term earning impact of incurring multiple large claims at one time, and is generally purchased by a direct insurance company for a large block of individuals and not on an individual basis.
Q53.
An insurance company may send a reinsurance case proposal to multiple reinsurers. The reinsurer who gives the most competitive offer is accepted by the insurance company to reinsure the case. This is known as _______________.

a.

Treaty shopping

b.

Treaty discounting

c.

Facultative discounting

d.

Facultative shopping

Discuss
Answer: (d).Facultative shopping Explanation:The given statement describes the process of Facultative shopping, where an insurance company sends a reinsurance case proposal to multiple reinsurers and the reinsurer who gives the most competitive offer is accepted by the insurance company to reinsure the case.
Q54.
What is one of the advantages of reinsurance arrangements?

a.

Maximizing losses

b.

Sharing of risks

c.

Limiting innovation

d.

Reducing underwriting assistance

Discuss
Answer: (b).Sharing of risks Explanation:One of the advantages of reinsurance arrangements is sharing of risks between the insurance company and the reinsurer, which minimizes losses.
Q55.
How can reinsurers help with underwriting?

a.

By handling large repositories of data

b.

By reducing the amount of reserves that must be held by the company

c.

By providing direct insurance companies with capital

d.

By offering their expertise in underwriting cases received by the direct insurer

Discuss
Answer: (d).By offering their expertise in underwriting cases received by the direct insurer Explanation:Reinsurers extend help in underwriting of cases received by the direct insurer through their registered offices.
Q56.
How can a reinsurance treaty be structured to help insurance companies cope with new business and other capital constraints?

a.

By reducing the amount of reserves that must be held by the company

b.

By providing direct insurance companies with capital

c.

By offering their expertise in underwriting cases received by the direct insurer

d.

By transferring the risk and liability from the direct insurance company to the reinsurer

Discuss
Answer: (a).By reducing the amount of reserves that must be held by the company Explanation:A reinsurance treaty can be structured so that the amount of reserves that must necessarily be held by a company can be reduced, which may be useful in coping with the new business and other capital constraints.
Q57.
What is the advantage of freeing up reserves for an insurance company?

a.

It reduces the need to make claim payments

b.

It allows the insurer to keep more funds for itself

c.

It improves the return on capital for the company

d.

It helps the company avoid adverse selection

Discuss
Answer: (c).It improves the return on capital for the company Explanation:Freeing up reserves can improve the return on capital for the company.
Q58.
How can knowledge sharing between the direct insurance company and the reinsurer be useful?

a.

It helps the direct insurance company avoid adverse selection

b.

It leads to revenue generation for the direct life insurance company

c.

It helps the direct insurance company design innovative products

d.

It proves to be very useful in the day-to-day operations of an insurer

Discuss
Answer: (d).It proves to be very useful in the day-to-day operations of an insurer Explanation:Since most of the reinsurers operate with their offices in many countries around the world, knowledge transfer or sharing of resources proves to be very useful in the day-to-day operations of an insurer.
Q59.
Which of the following is NOT an advantage of reinsurance arrangements?

a.

Minimizing losses

b.

Innovation

c.

Increase in capital requirements

d.

Freeing up of reserves

Discuss
Answer: (c).Increase in capital requirements Explanation:Reinsurance arrangements can help in reducing the amount of reserves that must necessarily be held by an insurance company, thus freeing up capital for new business. Therefore, increase in capital requirements is not an advantage of reinsurance arrangements.
Q60.
How can reinsurance arrangements help in improving return on capital for a company?

a.

By reducing the capital required without having a significant impact on profits

b.

By sharing knowledge with reinsurers operating in different countries

c.

By minimizing losses due to transfer or sharing of risks

d.

By freeing up reserves for meeting financial obligations of claim pay-outs

Discuss
Answer: (a).By reducing the capital required without having a significant impact on profits Explanation:If reinsurance can be used to reduce the capital required without having a significant impact on profits, the return on capital can be improved.
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