Glossary of Reinsurance Terms MCQs

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Glossary of Reinsurance Terms MCQs | Page 1 of 10

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Q1.
Which term refers to the expenses incurred by an insurance or reinsurance insurer directly related to acquiring business?

a.

Acquisition Cost

b.

Administration Expense

c.

Admitted Insurance

d.

Adverse Selection

Discuss
Answer: (a).Acquisition Cost Explanation:Acquisition cost refers to all expenses incurred by an insurance or reinsurance insurer that are directly related to acquiring business.
Q2.
What are the costs of running a business other than acquisition cost and settling claims called?

a.

Acquisition Cost

b.

Administration Expense

c.

Admitted Insurance

d.

Adverse Selection

Discuss
Answer: (b).Administration Expense Explanation:Administration expense refers to the costs of running a business other than acquisition cost and settling claims.
Q3.
What is the term used for insurance or reinsurance provided by an insurer or reinsurer who is licensed to do business in a specific country?

a.

Acquisition Cost

b.

Administration Expense

c.

Admitted Insurance

d.

Adverse Selection

Discuss
Answer: (c).Admitted Insurance Explanation:Admitted insurance or reinsurance refers to insurance or reinsurance provided by an insurer or reinsurer who is licensed to do business in a specific country.
Q4.
What term is used for the submission of risks, segments of risks, or coverages that are less attractive for retention by the reinsured to the reinsurer?

a.

Acquisition Cost

b.

Administration Expense

c.

Admitted Insurance

d.

Adverse Selection

Discuss
Answer: (d).Adverse Selection Explanation:Adverse selection refers to the submission of risks, segments of risks, or coverages that are less attractive for retention by the reinsured to the reinsurer.
Q5.
What is the term for a contract of reinsurance that is confined to business produced by a named agent of the insurer and administered directly with the reinsurer?

a.

Acquisition Cost

b.

Administration Expense

c.

Admitted Insurance

d.

Agency Reinsurance

Discuss
Answer: (d).Agency Reinsurance Explanation:Agency reinsurance refers to a contract of reinsurance that is confined to business produced by a named agent of the insurer and administered directly with the reinsurer.
Q6.
What term is used when the reinsurer indemnifies the reinsured for a cumulative amount of losses exceeding a specified aggregate amount?

a.

Aggregate Excess

b.

Alternative Risk Financing

c.

Anniversary

d.

Arbitration Clause

Discuss
Answer: (a).Aggregate Excess Explanation:Aggregate excess refers to the reinsurer indemnifying the reinsured for a cumulative amount of losses exceeding a specified aggregate amount.
Q7.
What is the term for the use of the capacity available on the capital markets to cover insurance risks, such as through the securitization of natural catastrophe risks?

a.

Aggregate Excess

b.

Alternative Risk Financing

c.

Anniversary

d.

Arbitration Clause

Discuss
Answer: (b).Alternative Risk Financing Explanation:Alternative risk financing refers to the use of the capacity available on the capital markets to cover insurance risks, such as through the securitization of natural catastrophe risks.
Q8.
What is the term for the date on which a contract is renewed, typically twelve months from the effective date of the contract?

a.

Aggregate Excess

b.

Alternative Risk Financing

c.

Anniversary

d.

Arbitration Clause

Discuss
Answer: (c).Anniversary Explanation:Anniversary refers to the date for the renewal of a contract, usually twelve months from the effective date of the contract. Note that in provisions dealing with run-off of contracts, the anniversary date refers to that of the underlying policies and not the reinsurance contract.
Q9.
What is the term for a clause in reinsurance treaties that allows the parties to submit any dispute or controversy to mutually agreed arbitrators instead of following the process of law?

a.

Aggregate Excess

b.

Alternative Risk Financing

c.

Anniversary

d.

Arbitration Clause

Discuss
Answer: (d).Arbitration Clause Explanation:An arbitration clause is a clause in reinsurance treaties that enables the parties to submit any dispute or controversy to mutually agreed arbitrators, including an umpire, instead of relying on the process of law. The clause typically provides for the decision of a majority of the arbitrators to be binding on the parties to the reinsurance treaty.
Q10.
What is the purpose of the "As If" method in reinsurance?

a.

To demonstrate prior years of reinsurance experience

b.

To calculate maximum limit of liability

c.

To determine the ratio between written premium and liability

d.

To assess the effectiveness of reinsurance programs

Discuss
Answer: (a).To demonstrate prior years of reinsurance experience Explanation:The "As If" method is used to recalculate prior years of reinsurance experience and demonstrate what the underwriting results of a particular program would have been if the proposed program had been in force during that period.
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