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 3 of 13

Discover more Topics under IC85 Reinsurance Management

Q21.
Which type of reinsurance is based on the principle of "Uberrima fides"?

a.

Facultative reinsurance

b.

Automatic reinsurance

c.

Proportional reinsurance

d.

Non-proportional reinsurance

Discuss
Answer: (b).Automatic reinsurance Explanation:In automatic (or obligatory) reinsurance, the reinsurer gives the insurer automatic underwriting power and therefore renounces any possibility of refusing risks he does not like. For this reason, the cedant must provide the reinsurer with detailed information on his portfolio both during the negotiations preliminary to the conclusion of the treaty and then for the period of its validity. The principle of "Uberrima fides" is of utmost importance in automatic reinsurance.
Q22.
What is the meaning of the term "Uberrima fides"?

a.

Absolute faith

b.

Complete trust

c.

Utmost good faith

d.

Full confidence

Discuss
Answer: (c).Utmost good faith Explanation:The term "Uberrima fides" means utmost good faith. The relationship between the insurer and reinsurer is based on this principle, which requires the insurer to provide the reinsurer with all information he needs to evaluate the risk correctly.
Q23.
What happens when the ceding insurer is in financial difficulties or insolvent?

a.

The reinsurer follows the ceding insurer's commercial fate

b.

The reinsurer shares the insurance fate with the insurer

c.

The reinsurer only follows the ceding insurer's fortunes from a technical point of view

d.

The reinsurer is not affected by the ceding insurer's financial difficulties

Discuss
Answer: (c).The reinsurer only follows the ceding insurer's fortunes from a technical point of view Explanation:When the ceding insurer is in financial difficulties or insolvent, the reinsurer only follows the ceding insurer's fortunes from a technical point of view, as stipulated in the treaties. The reinsurer only shares the "insurance fate" - in other words, he is not affected by the insurer's "commercial fate".
Q24.
What risks does the reinsurer run by granting cover to as many companies as possible?

a.

Exposure to accumulation of risks from any single event or risk

b.

Exposure to financial risks in countries with deficit budgets

c.

Exposure to exchange controls in some countries

d.

Exposure to fiscal risks in countries where tax can be levied on ceded premiums, commissions, profit commissions, interest, and the settlement of losses

Discuss
Answer: (a).Exposure to accumulation of risks from any single event or risk Explanation:The reinsurer runs the risk of accumulation of exposure from any single event or risk when he grants cover to as many companies as possible. Though, on an important policy, direct participations are easily controlled, it is practically impossible to control indirect commitments from reinsurances as accepted.
Q25.
What is the principle that the relation between insurer and reinsurer is based on?

a.

Good faith

b.

Bad faith

c.

Trust

d.

None of the above

Discuss
Answer: (a).Good faith Explanation:The relation between the insurer and the reinsurer is based on the principle of “Uberrima fides”, i.e. utmost good faith.
Q26.
In which type of reinsurance, the insurer has to provide the reinsurer with all information he needs to evaluate the risk correctly?

a.

Automatic reinsurance

b.

Facultative reinsurance

c.

Both

d.

None of the above

Discuss
Answer: (b).Facultative reinsurance Explanation:In facultative reinsurance, the insurer has to provide the reinsurer with all information he needs to evaluate the risk correctly.
Q27.
In which type of reinsurance, the principle of "uberrima fides" is of utmost importance?

a.

Automatic reinsurance

b.

Facultative reinsurance

c.

Both

d.

None of the above

Discuss
Answer: (a).Automatic reinsurance Explanation:In automatic (or obligatory) reinsurance, the principle of "uberrima fides" is of utmost importance.
Q28.
What is the situation when a reinsurer is insolvent?

a.

The ceding insurer is fully responsible for the total amount due to the insured.

b.

The reinsurer is responsible for the total amount due to the insured.

c.

The ceding insurer and reinsurer share the responsibility for the total amount due to the insured.

d.

None of the above

Discuss
Answer: (a).The ceding insurer is fully responsible for the total amount due to the insured. Explanation:When a reinsurer is insolvent, the ceding insurer is fully responsible for the total amount due to the insured, irrespective of the fact that he cannot recover the share of the reinsurer or any part of it.
Q29.
The relation between the insurer and the reinsurer is based on the principle of______________.

a.

Causa proxima

b.

Subrogation

c.

Uberrima fides

d.

Insurable interest

Discuss
Answer: (c).Uberrima fides Explanation:The relation between the insurer and the reinsurer is based on the principle of utmost good faith or Uberrima fides. The principle requires the insurer to provide the reinsurer with all information needed to evaluate the risk correctly. The reinsurer, in turn, gives the insurer automatic underwriting power and renounces any possibility of refusing risks that it does not like. The cedant must provide the reinsurer with detailed information on its portfolio both during the negotiations preliminary to the conclusion of the treaty and then for the period of its validity.
Q30.
What is reinsurance?

a.

An extension of insurance to cover risks beyond the capacity of a single insurer

b.

A type of insurance only available to large corporations

c.

A form of insurance designed to cover maritime risks

d.

A type of insurance that only covers specific types of risks

Discuss
Answer: (a).An extension of insurance to cover risks beyond the capacity of a single insurer Explanation:Reinsurance is the practice of one insurer (the reinsurer) assuming all or part of the risk covered under a policy issued by another insurer (the ceding company), in exchange for a premium payment. Reinsurance allows the ceding company to spread its risk and reduce its exposure to losses.
Page 3 of 13