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.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Introduction. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Introduction knowledge to the test? Let's get started with our carefully curated MCQs!

Introduction MCQs | Page 11 of 13

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Q101.
What is the basic principle of spread of risks?

a.

To ensure that result in any class of business is balanced

b.

To increase the insurer's ability to compete for business

c.

To achieve a wider spread of risks by writing business in many countries across many classes

d.

To limit the insurer's total aggregate commitment from all underwriting lines

Discuss
Answer: (a).To ensure that result in any class of business is balanced Explanation:The basic principle of spread of risks aims to ensure that result in any class of business is balanced and results are also balanced by geographical spread.
Q102.
What is the purpose of arranging an excess of loss reinsurance protection?

a.

To increase premium rates for direct business

b.

To limit the insurer's total aggregate commitment from all underwriting lines

c.

To achieve a wider spread of risks by writing business in many countries across many classes

d.

To stabilize the insurer's profitability

Discuss
Answer: (b).To limit the insurer's total aggregate commitment from all underwriting lines Explanation:By arranging an excess of loss reinsurance protection which operates when claims have occurred under several lines of business as a result of the same event, the insurer can limit his total aggregate commitment from all underwriting lines and protect his net underwriting result.
Q103.
How can a well-planned reinsurance program ensure compliance of solvency norms?

a.

By increasing premium rates for direct business

b.

By limiting the insurer's total aggregate commitment from all underwriting lines

c.

By providing financial stability to insurers

d.

By ensuring long-term profitability

Discuss
Answer: (d).By ensuring long-term profitability Explanation:A well-planned reinsurance program can ensure long-term profitability as well as compliance of solvency norms, which limit the net retained premium income of insurance companies in relation to their capital and free reserves.
Q104.
What is the function of excess of loss reinsurance protection?

a.

To protect the net underwriting result

b.

To limit the commitment from all underwriting lines

c.

To protect the insurer's total aggregate commitment

d.

Both a and b

Discuss
Answer: (d).Both a and b Explanation:Excess of loss reinsurance protection operates when claims have occurred under several lines of business as a result of the same event. It helps the insurer limit their total aggregate commitment from all underwriting lines and protect their net underwriting result.
Q105.
How does reinsurance achieve a wider spread of risks?

a.

By writing business in many countries across many classes

b.

By limiting the net retained premium income of insurance companies

c.

By attracting government and regulator's intervention

d.

By increasing the insurer's ability to compete for business

Discuss
Answer: (a).By writing business in many countries across many classes Explanation:Reinsurance achieves a wider spread of risks by writing business in many countries across many classes.
Q106.
What is the aim of the basic principle of spread of risks?

a.

To ensure that results in any class of business are balanced

b.

To achieve a wider spread of risks

c.

To increase the insurer's ability to compete for business

d.

To limit the insurer's total aggregate commitment

Discuss
Answer: (a).To ensure that results in any class of business are balanced Explanation:The basic principle of spread of risks aims to ensure that results in any class of business are balanced.
Q107.
How can a well-planned reinsurance programme ensure long term profitability?

a.

By increasing the insurer's ability to compete for business

b.

By controlling the insurer's expense ratio

c.

By complying with solvency norms

d.

By stabilizing the insurer's profitability

Discuss
Answer: (d).By stabilizing the insurer's profitability Explanation:A well-planned reinsurance programme can help stabilize the insurer's profitability.
Q108.
What is the analogy used by Dr. F.L. Tuma to describe the function of reinsurance?

a.

A shock absorber

b.

A communication channel

c.

A catalyst

d.

A technical restriction

Discuss
Answer: (a).A shock absorber Explanation:Dr. F.L. Tuma described the function of reinsurance by drawing analogy with a shock absorber. Reinsurance helps the insurer to reduce, from the point of view of possible material losses, the perils which it has accepted.
Q109.
What is the purpose of reinsurance?

a.

To reduce the perils that an insurance company has accepted

b.

To reduce the amount of premiums an insurer needs to collect

c.

To increase the likelihood of losses for an insurer

d.

To provide financial support to the reinsurer

Discuss
Answer: (a).To reduce the perils that an insurance company has accepted Explanation:Reinsurance is a means by which an insurer reduces the perils that it has accepted.
Q110.
What is the function of reinsurance?

a.

To provide financial support to the reinsurer

b.

To increase the likelihood of losses for an insurer

c.

To reduce the perils that an insurance company has accepted

d.

To reduce the amount of premiums an insurer needs to collect

Discuss
Answer: (c).To reduce the perils that an insurance company has accepted Explanation:Reinsurance is a means by which an insurer reduces the perils that it has accepted.
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