Introduction MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Introduction, 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 Introduction 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 Introduction mcq questions that explore various aspects of Introduction problems. Each MCQ is crafted to challenge your understanding of Introduction 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 Introduction MCQs are your pathway to success in mastering this essential IC85 Reinsurance Management topic.

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Introduction MCQs | Page 10 of 13

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Q91.
What are the functions of reinsurance?

a.

Providing increased capacity

b.

Providing stabilisation of operating results

c.

Reinforcing the underwriter's attempts to establish an account which is homogeneous in both size and quality of risk

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The functions of reinsurance include providing increased capacity, stabilising operating results, and reinforcing the underwriter's attempts to establish an account which is homogeneous in both size and quality of risk.
Q92.
What risks can reinsurance help insurers accept?

a.

Risks of complex nature

b.

High-value risks

c.

Concentrated risks

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Reinsurance can help insurers accept risks of complex nature, high value, and concentration by providing the extra capacity required to accept such risks and enabling them to handle large loss events.
Q93.
What is the function of reinsurance in providing increased capacity?

a.

To provide insurers with the extra capacity required to accept complex risks

b.

To enable insurers to handle large loss events

c.

To supplement protection to limit losses arising from a single event

d.

both a and b

Discuss
Answer: (d).both a and b Explanation:The function of reinsurance in providing increased capacity is to provide insurers with the extra capacity required to accept complex risks and to enable them to handle large loss events.
Q94.
Why is financial stability important for insurers?

a.

To manage and regulate their affairs in a manner that no nasty surprises by way of large losses endanger their financial stability

b.

To absorb the impact of fluctuations caused by inadequate spread of risks, unexpected weather conditions, social/economic developments, and new technology risks

c.

To achieve a premium spread over several years and be seen in the eyes of their insured as financially stable

d.

Both a and b

Discuss
Answer: (d).Both a and b Explanation:Financial stability is important for insurers to manage and regulate their affairs in a manner that no nasty surprises by way of large losses endanger their financial stability, and to absorb the impact of fluctuations caused by inadequate spread of risks, unexpected weather conditions, social/economic developments, and new technology risks.
Q95.
What is the fundamental principle of insurance?

a.

Spreading of risk based on the law of large numbers

b.

Providing increased capacity to handle complex risks

c.

Limiting loss arising from a single event causing loss or damage to many risks

d.

Stabilizing the operating results from year to year

Discuss
Answer: (a).Spreading of risk based on the law of large numbers Explanation:The fundamental principle of insurance is spreading of risk based on the law of large numbers.
Q96.
How does reinsurance help in ensuring financial stability for insurers?

a.

By reducing the number of claims

b.

By increasing premium rates

c.

By paying the reinsured portion of the loss

d.

By denying claims

Discuss
Answer: (c).By paying the reinsured portion of the loss Explanation:Reinsurance provides financial stability to insurers by paying the reinsured portion of the loss in the event of large losses or a single event capable of producing a claim or series of claims of very high magnitude through accumulation.
Q97.
What types of risks are particularly important for insurers to protect against?

a.

Natural perils such as Flood, Earthquake or Cyclone

b.

Inadequate spread of risks

c.

Unexpected weather conditions

d.

Social /economic developments resulting in higher third party / riot / theft / terrorism claims and new technology risks of unproven nature

Discuss
Answer: (a).Natural perils such as Flood, Earthquake or Cyclone Explanation:Protection against natural perils such as Flood, Earthquake, or Cyclone is of particular importance for insurers as a single event can cause loss or damage to many risks.
Q98.
What can cause major fluctuations in claims costs for an insurer?

a.

Inadequate spread of risks

b.

Unexpected weather conditions

c.

Social /economic developments resulting in higher third party / riot / theft / terrorism claims and new technology risks of unproven nature

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Major fluctuations in claims costs can be caused by inadequate spread of risks, unexpected weather conditions, social/economic developments resulting in higher third party/riot/theft/terrorism claims, and new technology risks of unproven nature.
Q99.
What is the purpose of reinsurance in insurance business?

a.

To increase premium rates for direct business

b.

To provide financial stability to insurers

c.

To limit the insurer's commitment from all underwriting lines

d.

To control the insurer's expense ratio

Discuss
Answer: (b).To provide financial stability to insurers Explanation:Reinsurance provides financial stability to insurers by paying the reinsured portion of the loss in case of large losses that may endanger the insurer's financial stability.
Q100.
What are the factors that can cause major fluctuations in claims costs?

a.

Inadequate spread of risks

b.

Unexpected weather conditions

c.

Social/economic developments resulting in higher third party claims

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Major fluctuations in claims costs can be caused by inadequate spread of risks, unexpected weather conditions, social/economic developments resulting in higher third party claims, and new technology risks of unproven nature.
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