Alternatives to Traditional Reinsurance MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Alternatives to Traditional Reinsurance, a fundamental topic in the field of IC85 Reinsurance Management. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Alternatives to Traditional Reinsurance MCQs are designed to help you grasp the core concepts and excel in solving problems.

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Alternatives to Traditional Reinsurance MCQs | Page 9 of 12

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Q81.
The capital market has been playing a growing role in which arena?

a.

Retrocessional arena

b.

Insurance market

c.

Reinsurance market

d.

Traditional market

Discuss
Answer: (a).Retrocessional arena Explanation:The capital market has been playing a growing role in the retrocessional arena, offering both index-based and traditional products.
Q82.
What is one of the factors that has led to an increase in capacity in the ART market?

a.

Higher reinsurance prices

b.

Increased demand for ART products

c.

Shortage of capacity in the retrocession market

d.

Successful writers of ART products making exceptional profits

Discuss
Answer: (d).Successful writers of ART products making exceptional profits Explanation:Successful writers of ART products have made exceptional profits, which has attracted many entrants and increased the capacity of the market.
Q83.
Why are reinsurance prices increasing in the retrocession market?

a.

Increased demand for ART products

b.

Shortage of capacity in the retrocession market

c.

Higher demand for conventional cover

d.

Decreased competition among reinsurers

Discuss
Answer: (b).Shortage of capacity in the retrocession market Explanation:Reinsurance prices in the retrocession market are increasing primarily due to a shortage of capacity, leading to higher demand for ART products.
Q84.
How did a French reinsurer obtain retrocessional cover?

a.

Through weather derivatives

b.

By issuing catastrophe bonds

c.

Through traditional reinsurance contracts

d.

By entering into a swap agreement

Discuss
Answer: (b).By issuing catastrophe bonds Explanation:The French reinsurer placed $200m of catastrophe bonds, which provided retrocessional cover for three years.
Q85.
What type of bonds did the largest rural insurer in the US issue to tap into the capital markets?

a.

Catastrophe bonds

b.

Windstorm bonds

c.

Weather derivatives

d.

Municipal bonds

Discuss
Answer: (b).Windstorm bonds Explanation:The largest rural insurer in the US issued $90m of windstorm bonds to tap into the capital markets.
Q86.
How is insurance used to improve the credit profile of a borrower in financing structures?

a.

By guaranteeing cash flow

b.

By providing credit enhancements

c.

By offering credit wraps

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Insurance is used in financing structures to improve the credit profile of a borrower by guaranteeing cash flow, providing credit enhancements, or offering credit wraps.
Q87.
What is the growing trend in investor interest in the insurance industry?

a.

Increased interest in traditional insurance products

b.

Growing number of dedicated investment funds for catastrophe bonds

c.

Shift towards investing in real estate

d.

Decreased interest in alternative risk techniques

Discuss
Answer: (b).Growing number of dedicated investment funds for catastrophe bonds Explanation:Investor interest in the insurance industry is strong, particularly in catastrophe bonds, with a growing number of dedicated investment funds.
Q88.
Which sector initially played a leading role in developing alternative risk techniques?

a.

Insurance industry

b.

Investment community

c.

Banking sector

d.

Reinsurance companies

Discuss
Answer: (c).Banking sector Explanation:The banking sector took the early lead in developing alternative risk techniques.
Q89.
What is the role of dedicated subsidiaries established by international reinsurers in the ART market?

a.

Providing traditional insurance products

b.

Offering refinancing opportunities for banks

c.

Participating in the development of alternative risk techniques

d.

Providing investment advice to policyholders

Discuss
Answer: (c).Participating in the development of alternative risk techniques Explanation:Dedicated subsidiaries established by international reinsurers are important participants in the ART market, contributing to the development of alternative risk techniques.
Q90.
What partnership is being extended between Munich Reinsurance Co. and HVB Group?

a.

Joint marketing of traditional insurance products

b.

Collaboration in underwriting large-scale projects

c.

Joint financing and reinsuring of large-scale projects

d.

Development of alternative risk transfer products

Discuss
Answer: (c).Joint financing and reinsuring of large-scale projects Explanation:Munich Reinsurance Co. and HVB Group are extending their partnership to include jointly financing and reinsuring large-scale projects.
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