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 3 of 8

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Q21.
What are the two options available to an insurer or reinsurer accepting reinsurance business?

a.

Reciprocal and non-reciprocal

b.

Gross lines and net lines

c.

Retention and retrocession

d.

Inward business and outward business

Discuss
Answer: (b).Gross lines and net lines Explanation:An insurer or reinsurer accepting reinsurance business has the option to write lines for their net account (net lines) or write larger shares and create a retrocession treaty (gross lines) to handle the surplus over their net retention.
Q22.
Why might an insurer or reinsurer starting to write reinsurance business initially choose to write only net lines?

a.

To increase their net premium

b.

To gain underwriting experience

c.

To secure a retrocession treaty

d.

To cover administrative costs

Discuss
Answer: (b).To gain underwriting experience Explanation:An insurer or reinsurer starting to write reinsurance business will typically write only net lines initially. This allows them to gain a certain amount of experience in underwriting before venturing into larger shares and retrocession.
Q23.
What is the purpose of a retrocession treaty?

a.

To increase net premium

b.

To cover administrative costs

c.

To secure reciprocal trading

d.

To handle surplus over net retention

Discuss
Answer: (d).To handle surplus over net retention Explanation:A retrocession treaty is created by an insurer or reinsurer to handle the surplus over their net retention. It allows them to transfer a portion of the risk to another party.
Q24.
Why might selling a retrocession treaty placed abroad be challenging?

a.

Lack of information about the business included

b.

High administrative costs involved

c.

Insufficient over-riding commission received

d.

Difficulty in securing reciprocal trading

Discuss
Answer: (a).Lack of information about the business included Explanation:Selling a retrocession treaty placed abroad, especially when there is no information regarding the nature of the business included, can be challenging. The lack of information makes it harder to market the treaty effectively.
Q25.
What is the relationship between over-riding commission and administrative cost in a retrocession arrangement?

a.

Over-riding commission covers administrative cost

b.

Over-riding commission is higher than administrative cost

c.

Over-riding commission is lower than administrative cost

d.

Over-riding commission is unrelated to administrative cost

Discuss
Answer: (c).Over-riding commission is lower than administrative cost Explanation:The over-riding commission received on a retrocession arrangement may not be sufficient to cover the administrative cost involved. This indicates that the administrative cost is higher than the commission received.
Q26.
Which type of reinsurance business involves more administrative work?

a.

Treaty reinsurance

b.

Facultative reinsurance

c.

Proportional reinsurance

d.

Non-proportional reinsurance

Discuss
Answer: (b).Facultative reinsurance Explanation:Facultative reinsurance business involves more administrative work because each offer needs to be individually scrutinized and accepted or declined.
Q27.
In which type of reinsurance business is premium volume built up faster?

a.

Treaty reinsurance

b.

Facultative reinsurance

c.

Proportional reinsurance

d.

Non-proportional reinsurance

Discuss
Answer: (a).Treaty reinsurance Explanation:Premium volume can be built up faster in treaty reinsurance business. However, it requires the underwriter to be familiar with various contractual conditions and up-to-date market conditions.
Q28.
What distinguishes proportional reinsurance from non-proportional reinsurance?

a.

Accumulations are possible under proportional reinsurance.

b.

Accumulations are possible under non-proportional reinsurance.

c.

Proportional reinsurance involves quota share and surplus treaties.

d.

Non-proportional reinsurance has a limit of liability for individual acceptances.

Discuss
Answer: (c).Proportional reinsurance involves quota share and surplus treaties. Explanation:In the proportional class of reinsurance, there are quota share, surplus, and facultative obligatory treaties. This distinguishes it from non-proportional reinsurance.
Q29.
What advantage does non-proportional reinsurance offer to the reinsurer?

a.

The reinsurer has a say in the rating of the cover.

b.

The reinsurer knows the limit of liability under an individual acceptance.

c.

Non-proportional reinsurance builds up premium volume faster.

d.

Non-proportional reinsurance involves more administrative work.

Discuss
Answer: (b).The reinsurer knows the limit of liability under an individual acceptance. Explanation:One advantage of non-proportional reinsurance is that the reinsurer knows the limit of liability under an individual acceptance. This allows for clearer risk assessment.
Q30.
What type of reinsurance involves accumulations under various treaties?

a.

Facultative reinsurance

b.

Proportional reinsurance

c.

Treaty reinsurance

d.

Non-proportional reinsurance

Discuss
Answer: (d).Non-proportional reinsurance Explanation:Accumulations are equally possible under non-proportional reinsurance. This means that multiple non-proportional treaties can have accumulations of risk.
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