Inward Reinsurance Business MCQs

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

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Inward Reinsurance Business MCQs | Page 2 of 8

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Q11.
For which of the following reasons does ‘direct writing insurance companies’ start to write inward reinsurance business?

a.

To increase payment of claim amount

b.

To achieve a lower income ratio by the maintenance of the volume of premium income

c.

To obtain a better and wide spread of business by writing business from overseas

d.

To spend investment income, which is derived from cash flow resulting from inward acceptances

Discuss
Answer: (c).To obtain a better and wide spread of business by writing business from overseas Explanation:Direct writing insurance companies may write inward reinsurance business for the reason of obtaining a better and wide spread of business by writing business from overseas. This allows them to diversify their acceptances across markets and minimize the impact of claim fluctuations.
Q12.
What is a key requirement for an insurer or reinsurer to transact inward reinsurance business?

a.

Development of a corporate strategy

b.

Acquisition of new technology

c.

Expansion of direct business

d.

Reduction of claim amount

Discuss
Answer: (a).Development of a corporate strategy Explanation:An insurer or reinsurer who wishes to transact inward reinsurance business needs to develop a corporate strategy supported by proper infrastructure within their organization. This strategy should aim to produce a reasonable profit over a period of time and requires skills, knowledge of reinsurance techniques, and experience of the international markets.
Q13.
Why is intimate knowledge of markets and classes of business essential for transacting inward reinsurance business?

a.

To increase claim payments

b.

To exclude acceptances in adverse markets

c.

To expand the volume of business

d.

To attract business with quality

Discuss
Answer: (b).To exclude acceptances in adverse markets Explanation:Intimate knowledge of markets and classes of business is essential for transacting inward reinsurance business. This knowledge allows the insurer or reinsurer to restrict or exclude acceptances in adverse markets, such as those with extremely adverse results like U.S. liability or professional indemnity.
Q14.
What has changed in the composition of reinsurance capacity in recent years?

a.

Dominance of professional reinsurers

b.

Increase in traditional reinsurers

c.

Shift towards non-traditional markets

d.

Reduction in capital market capacity

Discuss
Answer: (c).Shift towards non-traditional markets Explanation:There have been dramatic changes in the methods and forms used in the reinsurance industry. One of these changes is the use of non-traditional markets, which adds to the traditional reinsurers. This shift in the composition of reinsurance capacity means that capacity is now available from both reinsurance and capital markets.
Q15.
Why should an insurer or reinsurer plan to write a reasonably large line when transacting inward reinsurance business?

a.

To attract business with quality

b.

To minimize claim costs

c.

To reduce acceptances in adverse markets

d.

To decrease reinsurance expenses

Discuss
Answer: (a).To attract business with quality Explanation:An insurer or reinsurer should plan to write a reasonably large line when transacting inward reinsurance business. This is because writing a larger line helps attract business with quality, and it also helps keep the costs of acceptances economical.
Q16.
What percentage of global reinsurers rely on retrocessional protection?

a.

Close to 10%

b.

Close to 25%

c.

Close to 50%

d.

Close to 90%

Discuss
Answer: (d).Close to 90% Explanation:Close to 90% of global reinsurers depend on some form of retrocessional protection as a means to cede a portion of their risk and stabilize their earnings.
Q17.
What is the purpose of retrocession in the risk management process of reinsurers?

a.

To increase earnings

b.

To stabilize premiums

c.

To reduce financial problems

d.

To cede a portion of risk

Discuss
Answer: (d).To cede a portion of risk Explanation:Retrocession is an essential tool in the risk management process of reinsurers. It is used to cede a portion of their risk and stabilize their earnings.
Q18.
How does credit rating assist in determining the quality of retrocession offers?

a.

By assessing financial problems

b.

By monitoring accumulations

c.

By controlling natural perils

d.

By evaluating the financial strength of counterparties

Discuss
Answer: (d).By evaluating the financial strength of counterparties Explanation:The tool of credit rating assists in determining the quality of retrocession offers. Credit rating helps evaluate the financial strength of counterparties, providing insight into their ability to fulfill their obligations.
Q19.
What is the role of a management information system in writing inward reinsurance?

a.

To control accumulations

b.

To stabilize earnings

c.

To monitor results and portfolios

d.

To gather information first hand

Discuss
Answer: (c).To monitor results and portfolios Explanation:A suitable management information system is required to constantly monitor the results of each acceptance and the inward portfolio as a whole. It helps track the performance and outcomes of inward reinsurance activities.
Q20.
How can accumulation risks arising from inward reinsurance business be controlled?

a.

Through proper information system and retrocession

b.

Through credit rating evaluation

c.

Through financial problem management

d.

Through natural peril coverage

Discuss
Answer: (a).Through proper information system and retrocession Explanation:Accumulation risks arising from inward reinsurance business, especially in regions prone to natural perils, can be controlled through a proper information system and retrocession. These tools help manage and mitigate the risks associated with accumulations.
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