Glossary of Reinsurance Terms MCQs

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Glossary of Reinsurance Terms MCQs | Page 6 of 10

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Q51.
Who is a "Lead Underwriter" in reinsurance?

a.

An underwriter who negotiates reinsurance terms and conditions

b.

An underwriter who takes the primary responsibility for claims settlement

c.

An underwriter who sets the premium rates for reinsurance contracts

d.

An underwriter who specializes in specific lines of business

Discuss
Answer: (a).An underwriter who negotiates reinsurance terms and conditions Explanation:A Lead Underwriter is an individual or organization that plays a major role in negotiating the terms and conditions of a reinsurance cover. Other underwriters often follow the lead underwriter's terms without further negotiation due to their reputation and expertise.
Q52.
What does the term "Limits" refer to in reinsurance?

a.

The maximum amounts of interest insured

b.

The contractual provisions for claim settlements

c.

The specific coverage exclusions in reinsurance contracts

d.

The regulatory limits imposed on reinsurance companies

Discuss
Answer: (a).The maximum amounts of interest insured Explanation:The term "Limits" in reinsurance refers to the maximum amounts of interest insured. It can refer to the cedant's retention, the cedant's gross capacity, or the maximum amount that can be reinsured under a reinsurance contract.
Q53.
How is the term "Line" used in the context of reinsurance?

a.

It refers to the limit of insurance set by an insurer on a class of risk

b.

It denotes the number of underwriters involved in a reinsurance contract

c.

It describes the length of time a reinsurance contract remains in force

d.

It represents the total premium income generated by a reinsurer

Discuss
Answer: (a).It refers to the limit of insurance set by an insurer on a class of risk Explanation:The term "Line" can have multiple meanings in reinsurance. In one context, it refers to the limit of insurance that an insurer has set for itself on a class of risk. It can also represent the actual amount accepted on a single risk or other unit.
Q54.
What is meant by "Long-Tail Liability" in insurance and reinsurance?

a.

Liability arising from accidents involving multiple parties

b.

Liability for losses that occur after the policy period has ended

c.

Liability associated with delayed claims settlement

d.

Liability for losses caused by natural disasters

Discuss
Answer: (c).Liability associated with delayed claims settlement Explanation:"Long-Tail Liability" refers to certain types of third-party liability exposures where the incidence of loss and determination of damages are subject to delays extending beyond the term of insurance or reinsurance coverage. It involves situations where claims are discovered or reported long after the policy period has ended.
Q55.
What are "Losses Outstanding" in reinsurance?

a.

Losses that have occurred but have not yet been paid

b.

Losses that are currently being investigated by the reinsurer

c.

Losses that are covered by a separate reinsurance contract

d.

Losses that have been reported but are not yet settled

Discuss
Answer: (a).Losses that have occurred but have not yet been paid Explanation:"Losses Outstanding" refers to losses, whether reported or not, that have occurred but have not yet been paid. These are unpaid losses for which the reinsurer is liable.
Q56.
What does the "Losses occurring basis" refer to in excess of loss insurance?

a.

The reinsurer's responsibility for all claims during the treaty period

b.

The reinsurer's responsibility for claims based on the original policies

c.

The reinsurer's responsibility for claims reported after the treaty period

d.

The reinsurer's responsibility for claims reported during the treaty period

Discuss
Answer: (a).The reinsurer's responsibility for all claims during the treaty period Explanation:The "Losses occurring basis" is a system used in excess of loss insurance where the reinsurer is responsible for all claims occurring during the currency of the treaty, without reference to the period of the original policies.
Q57.
What do "Losses Paid" refer to in insurance?

a.

The total losses incurred by the insurer

b.

The amounts paid to claimants as insurance claim settlement

c.

The financial reserves set aside for future claim payments

d.

The losses reported but not yet settled by the insurer

Discuss
Answer: (b).The amounts paid to claimants as insurance claim settlement Explanation:
Q58.
How is the "Loss Ratio" calculated in insurance?

a.

Losses incurred divided by total premiums written

b.

Losses incurred divided by total claims reported

c.

Losses paid divided by total premiums earned

d.

Losses paid divided by total claims settled

Discuss
Answer: (a).Losses incurred divided by total premiums written Explanation:The "Loss Ratio" is calculated by dividing losses incurred by earned premiums and expressing the result as a percentage. It measures the proportion of losses to premiums written.
Q59.
What is the purpose of a "Loss Ratio Stabilising Clause"?

a.

To stabilize the ratio of claims to premiums in reinsurance contracts

b.

To stabilize the ratio of losses paid to claims reported

c.

To stabilize the ratio of losses incurred to premiums earned

d.

To stabilize the ratio of loss reserves to total claims

Discuss
Answer: (c).To stabilize the ratio of losses incurred to premiums earned Explanation:The "Loss Ratio Stabilising Clause" is another term for "Stop Loss Reinsurance." It is used to stabilize the ratio of losses incurred to premiums earned.
Q60.
What does the "Net Line" represent in insurance?

a.

The total amount of insurance carried by the primary insurer on a risk

b.

The amount of insurance after deducting reinsurance from the gross line

c.

The maximum limit of reinsurance coverage under a specific contract

d.

The amount of insurance written by the reinsurer on a risk

Discuss
Answer: (b).The amount of insurance after deducting reinsurance from the gross line Explanation:The "Net Line" refers to the amount of insurance carried by the primary insurer on a risk after deducting reinsurance from its gross line. It represents the net exposure retained by the primary insurer.
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