Forms of Reinsurance MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Forms of 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 Forms of 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 Forms of Reinsurance mcq questions that explore various aspects of Forms of Reinsurance problems. Each MCQ is crafted to challenge your understanding of Forms of Reinsurance principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC85 Reinsurance Management tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Forms of Reinsurance MCQs are your pathway to success in mastering this essential IC85 Reinsurance Management topic.

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Forms of Reinsurance MCQs | Page 5 of 6

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Q41.
What is the purpose of a reinsurance contract?

a.

To provide coverage for the reinsurer's own losses

b.

To indemnify the ceding insurer for losses covered by the contract

c.

To provide coverage for risks outside the scope of the original insurance policy

d.

To share profits between the ceding insurer and the reinsurer

Discuss
Answer: (b).To indemnify the ceding insurer for losses covered by the contract Explanation:A reinsurance contract is an agreement between an insurer and a reinsurer where the reinsurer agrees to indemnify the insurer for losses covered by the contract.
Q42.
What is the difference between proportional and non-proportional reinsurance?

a.

The type of risk covered

b.

The degree of risk assumed by the reinsurer

c.

The degree of risk assumed by the ceding insurer

d.

The type of reinsurance contract used

Discuss
Answer: (b).The degree of risk assumed by the reinsurer Explanation:Proportional reinsurance involves the reinsurer sharing the risk and premium with the ceding insurer in a predetermined percentage, while non-proportional reinsurance involves the reinsurer assuming the risk above a certain threshold.
Q43.
What is facultative reinsurance?

a.

An agreement between the original insurer and the reinsurer whereby the reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement

b.

A contract of reinsurance whereby the ceding insurer may cede risks of any agreed class of insurance which the reinsurer must accept if ceded

c.

An option for the ceding insurer to cede and the reinsurer to accept a specific risk of a specific insured

d.

A type of reinsurance used for high-value exposures or to deal with high accumulation

Discuss
Answer: (c).An option for the ceding insurer to cede and the reinsurer to accept a specific risk of a specific insured Explanation:Facultative reinsurance involves the ceding insurer having the option to cede and the reinsurer having the option to accept a specific risk of a specific insured.
Q44.
Can facultative reinsurance be obtained before accepting to insure a client?

a.

Yes

b.

No

c.

May be Yes or No

d.

Can't say

Discuss
Answer: (a).Yes Explanation:When reinsuring facultatively, the insurer may obtain reinsurance coverage before accepting to insure a client.
Q45.
What is treaty reinsurance?

a.

An agreement between the original insurer and the reinsurer whereby the reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement

b.

A contract of reinsurance whereby the ceding insurer may cede risks of any agreed class of insurance which the reinsurer must accept if ceded

c.

An option for the ceding insurer to cede and the reinsurer to accept a specific risk of a specific insured

d.

A type of reinsurance used for high-value exposures or to deal with high accumulation

Discuss
Answer: (a).An agreement between the original insurer and the reinsurer whereby the reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement Explanation:Treaty reinsurance consists of an agreement between the original insurer and the reinsurer whereby the reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement.
Q46.
What is retrocession?

a.

A type of reinsurance used for high-value exposures or to deal with high accumulation

b.

An agreement between the original insurer and the reinsurer whereby the reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement

c.

An option for the ceding insurer to cede and the reinsurer to accept a specific risk of a specific insured

d.

The process of one reinsurance company reinsuring another reinsurance company

Discuss
Answer: (d).The process of one reinsurance company reinsuring another reinsurance company Explanation:When a reinsurance company reinsures another reinsurance company, the process is known as retrocession.
Q47.
Which of the following forms of reinsurance, reinsures risks on individual basis?

a.

Facultative

b.

Retrocession

c.

Treaty reinsurance

d.

Facultative obligatory treaty

Discuss
Answer: (a).Facultative Explanation:Facultative reinsurance is a form of reinsurance where the reinsurer evaluates each risk individually and has the option to accept or reject each risk that is presented to it by the ceding insurer. It is used to cover risks that are not covered by a treaty and is usually employed for large or unusual risks. In contrast, treaty reinsurance is a type of reinsurance that covers a number of risks under a single contract, while retrocession is a process whereby a reinsurance company reinsures another reinsurance company, and facultative obligatory treaty is a contract of reinsurance whereby the ceding insurer may cede risks of any agreed class of insurance which the reinsurer must accept if ceded.
Q48.
In which of the following reinsurance contracts does the ceding insurer have the option to cede and the reinsurer have the option to accept a specific risk of a specific insured?

a.

Facultative

b.

Retrocession

c.

Treaty reinsurance

d.

Facultative obligatory treaty

Discuss
Answer: (a).Facultative Explanation:In facultative reinsurance, the ceding insurer has the option to cede and the reinsurer has the option to accept a specific risk of a specific insured. Treaty reinsurance consists of an agreement between the original insurer and the reinsurer whereby the reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement. Facultative obligatory treaty is a combination of facultative and treaty forms, where the ceding insurer may cede risks of any agreed class of insurance which the reinsurer must accept if ceded. Retrocession is a process where a reinsurance company reinsures another reinsurance company.
Q49.
In which of the following reinsurance contract insurer needs to obtain reinsurance coverage before accepting to insure a client?

a.

Facultative

b.

Retrocession

c.

Treaty reinsurance

d.

Facultative obligatory treaty

Discuss
Answer: (a).Facultative Explanation:In Facultative reinsurance, the insurer has the option to cede and the reinsurer has the option to accept a specific risk of a specific insured. When reinsuring facultatively, the insurer may obtain reinsurance coverage before accepting to insure a client. This means that the insurer may approach a reinsurer before deciding to underwrite a particular risk to make sure that it can obtain adequate reinsurance coverage in case the risk materializes.
Q50.
Which of the following forms of reinsurance is used to arrange automatic additional capacity for the surplus after exhausting the existing automatic arrangements for reinsurance cessions?

a.

Facultative

b.

Retrocession

c.

Treaty reinsurance

d.

Facultative obligatory treaty

Discuss
Answer: (d).Facultative obligatory treaty Explanation:Facultative obligatory treaty is used to arrange automatic additional capacity for surplus after exhausting existing automatic arrangements for reinsurance cessions. Therefore, option d is the correct answer. Option a Facultative reinsurance is reinsurance where the ceding insurer has the option to cede and the reinsurer has the option to accept a specific risk of a specific insured. Option b Retrocession is a process where a reinsurance company reinsures another reinsurance company. Option c Treaty reinsurance consists of an agreement between the original insurer and the reinsurer whereby the reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement.
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