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!

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Introduction MCQs | Page 2 of 13

Discover more Topics under IC85 Reinsurance Management

Q11.
What is moral hazard in reinsurance?

a.

The risk of granting cover through an insurance policy

b.

The risk of inefficient technical attention

c.

The risk of unjustified, exaggerated, or fraudulent claims

d.

The risk inherent in all human undertaking

Discuss
Answer: (d).The risk inherent in all human undertaking Explanation:Moral hazard in reinsurance refers to the risk inherent in all human undertaking, which can occur to the detriment of both the insurer and the reinsurer.
Q12.
What is the responsibility of reinsurers in regard to rate of exchange risk?

a.

Reinsurers assume responsibility for rate of exchange risk

b.

Reinsurers do not assume responsibility for rate of exchange risk

c.

Reinsurers share responsibility for rate of exchange risk with the insurer

d.

Reinsurers only assume responsibility for rate of exchange risk under certain circumstances

Discuss
Answer: (b).Reinsurers do not assume responsibility for rate of exchange risk Explanation:Reinsurers assume no responsibility for rate of exchange risk.
Q13.
What task is one of the most important and most delicate tasks of the reinsurer?

a.

Setting premiums

b.

Assessing liabilities

c.

Setting up an investment budget which takes into account exchange rate fluctuations

d.

Developing new business opportunities

Discuss
Answer: (c).Setting up an investment budget which takes into account exchange rate fluctuations Explanation:Setting up an investment budget which takes into account exchange rate fluctuations is one of the most important, and most delicate, tasks of the reinsurer.
Q14.
How does inflation affect technical statistics in insurance?

a.

It reduces the value of investments on the one hand and distorts technical statistics on the other

b.

It increases the value of investments on the one hand and distorts technical statistics on the other

c.

It has no effect on the value of investments or technical statistics

d.

It only distorts technical statistics on a long-term basis

Discuss
Answer: (a).It reduces the value of investments on the one hand and distorts technical statistics on the other Explanation:Inflation reduces the value of the investments on the one hand and distorts technical statistics on the other by artificially inflating premiums, losses and costs, thus rendering the statistics either useless or dangerously optimistic on a short-term basis.
Q15.
What can affect the payment of foreign exchange and cash calls in reinsurance?

a.

Monetary situation

b.

Inflation

c.

Investment budget

d.

Follow the Fortunes clause

Discuss
Answer: (a).Monetary situation Explanation:Payment of foreign exchange is also subject to risks, mostly due to the monetary situation which can affect both the insurer and the reinsurer.
Q16.
What is the primary reason why reinsurers assume no responsibility for rate of exchange risk?

a.

It does not affect the result of reinsurance

b.

It directly affects the result of reinsurance

c.

The insurer bears the consequences of rate of exchange risk

d.

The reinsurer has no control over rate of exchange risk

Discuss
Answer: (d).The reinsurer has no control over rate of exchange risk Explanation:Reinsurers assume no responsibility for rate of exchange risk, despite the fact that it directly affects the result. The reason for this is that the reinsurer has no control over rate of exchange risk.
Q17.
Which of the following risks does inflation pose to reinsurance operations?

a.

It reduces the value of the investments on the one hand

b.

It distorts technical statistics by artificially inflating premiums, losses, and costs

c.

It renders the statistics either useless or dangerously optimistic on a short-term basis

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Inflation reduces the value of investments and distorts technical statistics by artificially inflating premiums, losses, and costs, rendering the statistics either useless or dangerously optimistic on a short-term basis.
Q18.
What is the impact of special and unrealistic exchange controls on reinsurance operations?

a.

It results in loss of interest to the reinsurance markets

b.

It leads to diminution of the cover

c.

It results in an increase in rates

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Reinsurance operations are subject to special and most unrealistic exchange controls in extreme cases, and payments to reinsurers may be "frozen" for months, resulting in loss of interest to the reinsurance markets, diminution of the cover, and eventually, an increase in rates.
Q19.
Why is the acquisition and underwriting results of a reinsurance insurer directly dependent on its quality?

a.

Because reinsurance operations are easily controllable by the supervisory authority

b.

Because tax can be levied on several components of reinsurance operations

c.

Because the reinsurer must work on as wide a basis as possible

d.

Because several reinsurance companies have suffered setbacks through deficient organization

Discuss
Answer: (d).Because several reinsurance companies have suffered setbacks through deficient organization Explanation:The internal and external organization of a reinsurance insurer is of prime importance because the acquisition and underwriting results are directly dependent on its quality. Several reinsurance companies have suffered considerable setbacks through deficient organization as a result of bad planning, incomplete control, or lack of specialist.
Q20.
What is the principle on which the relationship between the insurer and reinsurer is based?

a.

Legal binding

b.

Uberrima fides

c.

Confidence

d.

Goodwill

Discuss
Answer: (b).Uberrima fides Explanation:The relationship between the insurer and reinsurer is based on the principle of "Uberrima fides", i.e. utmost good faith, which extends to the underwriting of risks, the settlement of claims, and the determination of retentions and cessions.
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