Glossary of Reinsurance Terms MCQs

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Glossary of Reinsurance Terms MCQs | Page 8 of 10

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Q71.
What is a "Professional Reinsurer" in the context of the insurance industry?

a.

An organization specializing in primary insurance business

b.

An organization primarily engaged in reinsurance and related services

c.

An organization operating reinsurance assuming departments in addition to primary insurance business

d.

An organization that offers reinsurance to individual policyholders

Discuss
Answer: (b).An organization primarily engaged in reinsurance and related services Explanation:A "Professional Reinsurer" as an organization whose main business is reinsurance and related services. This distinguishes them from other insurance organizations that may have reinsurance departments but primarily focus on primary insurance.
Q72.
What is "Pro Rata Reinsurance"?

a.

Reinsurance that shares a proportional part of ceded insurance liability, premiums, and losses of the ceding insurer

b.

Reinsurance that transfers all insurance liability to the reinsurer

c.

Reinsurance that covers only a portion of the ceding insurer's losses

d.

Reinsurance that allows the reinsurer to assume excess liability beyond the limits of the ceding insurer

Discuss
Answer: (a).Reinsurance that shares a proportional part of ceded insurance liability, premiums, and losses of the ceding insurer Explanation:"Pro Rata Reinsurance" refers to both quota share and surplus share reinsurance. In this type of reinsurance, the reinsurer shares a proportional part of the ceded insurance liability, premiums, and losses of the ceding insurer.
Q73.
What is "Quota-Share Reinsurance"?

a.

Reinsurance that transfers all insurance liability to the reinsurer

b.

Reinsurance that covers only a portion of the ceding insurer's losses

c.

Reinsurance in which the reinsurer assumes an agreed percentage of each insurance being reinsured and shares all premiums and losses accordingly with the reinsured

d.

Reinsurance that allows the reinsurer to assume excess liability beyond the limits of the ceding insurer

Discuss
Answer: (c).Reinsurance in which the reinsurer assumes an agreed percentage of each insurance being reinsured and shares all premiums and losses accordingly with the reinsured Explanation:"Quota-Share Reinsurance" can be defined as a form of pro rata reinsurance where the reinsurer assumes an agreed percentage of each insurance being reinsured and shares all premiums and losses accordingly with the reinsured.
Q74.
What is "Quota-Share Reinsurance"?What is "Reciprocity" in the context of reinsurance?

a.

Reinsurance that transfers all insurance liability to the reinsurerThe process of reinstating a reinsurance limit after payment of a loss

b.

Reinsurance that covers only a portion of the ceding insurer's lossesThe mutual exchange of reinsurance between parties to stabilize overall results

c.

Reinsurance in which the reinsurer assumes an agreed percentage of each insurance being reinsured and shares all premiums and losses accordingly with the reinsuredThe sharing of premiums and losses between the reinsurer and reinsured in quota-share reinsurance

d.

Reinsurance that allows the reinsurer to assume excess liability beyond the limits of the ceding insurerThe restoration of an excess property treaty to its full limit after a loss payment

Discuss
Answer: (b).Reinsurance in which the reinsurer assumes an agreed percentage of each insurance being reinsured and shares all premiums and losses accordingly with the reinsuredThe mutual exchange of reinsurance between parties to stabilize overall results Explanation:"Quota-Share Reinsurance" can be defined as a form of pro rata reinsurance where the reinsurer assumes an agreed percentage of each insurance being reinsured and shares all premiums and losses accordingly with the reinsured."Reciprocity" can be defined as the mutual exchanging of reinsurance, often in equal amounts, from one party to another. The purpose of reciprocity is to stabilize overall results in the reinsurance market.
Q75.
What is "Reinstatement" in the context of reinsurance?

a.

The process of sharing premiums and losses in quota-share reinsurance

b.

The restoration of a reinsurance limit to its full amount after a loss payment

c.

The language that describes the coverage agreed upon by the parties in a reinsurance contract

d.

The mutual exchange of reinsurance between parties

Discuss
Answer: (b).The restoration of a reinsurance limit to its full amount after a loss payment Explanation:"Reinstatement" refers to the restoration of the reinsurance limit of an excess property treaty to its full amount after the reinsurer has made a loss payment due to an occurrence.
Q76.
What is a "Reinsuring Clause" in the context of reinsurance?

a.

The process of sharing premiums and losses in quota-share reinsurance

b.

The language that describes the coverage agreed upon by the parties in a reinsurance contract

c.

The mutual exchange of reinsurance between parties

d.

The restoration of a reinsurance limit to its full amount after a loss payment

Discuss
Answer: (b).The language that describes the coverage agreed upon by the parties in a reinsurance contract Explanation:A "Reinsuring Clause" can be defined as the language that describes the coverage agreed upon by the parties in a reinsurance contract. It includes the indemnity aspect, the type of business covered, and the method of determining whether a loss falls within the scope of the agreement.
Q77.
What is "Retention" in the context of reinsurance?

a.

Reinsurance that transfers all insurance liability to the reinsurer

b.

Reinsurance that covers only a portion of the ceding insurer's losses

c.

The process of reinstating a reinsurance limit after payment of a loss

d.

The amount of insurance liability or loss that an insurer assumes for its own account

Discuss
Answer: (d).The amount of insurance liability or loss that an insurer assumes for its own account Explanation:"Retention" can be defined as the amount of insurance liability or loss that an insurer assumes (or retains) for its own account. It can refer to the insurer's portion of liability in pro rata reinsurance or the insurer's portion of loss in excess of loss reinsurance.
Q78.
What is "Retrocession" in the context of reinsurance?

a.

The reinsuring of reinsurance

b.

The process of transferring insurance liability from a ceding insurer to a reinsurer

c.

The assumption of risk by a retrocessionnaire

d.

The termination of a reinsurance contract by the reinsurer

Discuss
Answer: (a).The reinsuring of reinsurance Explanation:"Retrocession" can be defined as the reinsuring of reinsurance. It involves a separate contract and document from the original reinsurance agreement, where the assuming reinsurer is known as the retrocessionnaire.
Q79.
What is a "Retrocessionnaire"?

a.

The reinsured party in a retrocession

b.

The original reinsurer in a retrocession

c.

The assuming reinsurer in a retrocession

d.

The primary insurer in a retrocession

Discuss
Answer: (c).The assuming reinsurer in a retrocession Explanation:The assuming reinsurer in a retrocession is referred to as the retrocessionnaire. The ceding reinsurer, on the other hand, is known as the retrocedent.
Q80.
What is "Risk Based Capital"?

a.

The capital needed to absorb the risks of operating an insurance business

b.

The amount of capital invested by reinsurers in high-risk businesses

c.

The calculation of capital required for retrocession agreements

d.

The capital allocated for run-off cancellation or termination

Discuss
Answer: (a).The capital needed to absorb the risks of operating an insurance business Explanation:"Risk Based Capital" can be defined as the amount of capital needed to absorb the various risks of operating an insurance business. It takes into account the level of risk associated with different types of businesses.
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