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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Q41.
Why is it important for the acceptance limit to be sufficiently large?

a.

To attract ceding insurers and brokers

b.

To make the handling of business administratively economical

c.

To build up a sizeable portfolio

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:A sufficiently large acceptance limit is important to attract ceding insurers and brokers, make the handling of business administratively economical, and build up a sizeable portfolio.
Q42.
What should be emphasized when laying down guidelines for accepting business?

a.

Satisfactory past experience

b.

Reasonable profit over a period of years

c.

Sufficient premium per contract

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Guidelines for accepting business should emphasize factors such as satisfactory past experience, ensuring a reasonable profit over a period of years, and having a sufficient premium per contract.
Q43.
What should be considered when determining the competent authority to make acceptances on behalf of the insurer?

a.

Financial standing of the authority

b.

Expertise in underwriting

c.

Knowledge of market conditions

d.

Guidelines specified by the insurer

Discuss
Answer: (d).Guidelines specified by the insurer Explanation:The guidelines for acceptances should specify the competent authority to make acceptances on behalf of the insurer. This indicates that the determination of the competent authority should be based on the guidelines set by the insurer.
Q44.
What is one of the considerations for justifying the cost involved in having the business in the books of the insurer?

a.

Premium per contract

b.

Financial standing of the reinsurer

c.

Acceptance limit

d.

Geographical scope

Discuss
Answer: (a).Premium per contract Explanation:The premium per contract should be sufficient to justify the cost involved in having the business in the books of the insurer. This indicates that the premium per contract is one of the considerations for justifying the cost.
Q45.
Which of the following tools help in determining quality in the case of inward reinsurance business?

a.

Management Information System

b.

Credit Rating

c.

Retrocession

d.

F oreign exchange expertise

Discuss
Answer: (b).Credit Rating Explanation:The tool of credit rating assists in determining quality in the case of inward reinsurance business. Credit rating is a measure of the financial strength and stability of the reinsurer, providing an indication of their ability to meet their obligations. By assessing the credit rating of potential reinsurers, insurers can gauge the quality and reliability of the reinsurer before entering into a reinsurance agreement.
Q46.
Which of the following is a purpose of retrocession in the reinsurance industry?

a.

To increase the acceptance of larger lines

b.

To lead quotes on reinsurance proposals

c.

To exert influence on rate quoted by lead underwriters

d.

To provide alternative cost-effective capacity

Discuss
Answer: (a).To increase the acceptance of larger lines Explanation:Retrocession is required to enable the acceptance of larger lines. By retroceding a part of the acceptance to a retrocession arrangement, the accepting insurer or reinsurer can increase their capacity to accept larger lines of business.
Q47.
In a soft market with over capacity, what is the behavior of lead underwriters regarding retrocession?

a.

They yield to broker pressure to quote lower rates

b.

They increase their acceptance of larger lines

c.

They exert significant influence on rate quoted by primary reinsurers

d.

They face scarcity of reinsurance offers

Discuss
Answer: (a).They yield to broker pressure to quote lower rates Explanation:In a soft market with over capacity, lead underwriters yield to broker pressure to quote lower rates. This implies that they are willing to lower their rates to secure business, and retrocession support is still forthcoming in such market conditions.
Q48.
Which markets provide alternative cost-effective capacity besides retrocessional markets?

a.

Captives and capital markets

b.

Lead primary reinsurers

c.

Self-retentions and alternative means

d.

Soft and hard markets

Discuss
Answer: (a).Captives and capital markets Explanation:Captives and capital markets provide alternative cost-effective capacity. These markets are an additional sources of capacity besides retrocessional markets, offering alternative options for obtaining reinsurance coverage.
Q49.
What is the impact of the absence of retrocessional support in a hard market?

a.

It leads to an increase in the acceptance of larger lines

b.

It results in scarce reinsurance offers

c.

It exerts significant influence on rate quoted by lead underwriters

d.

It yields to broker pressure to quote lower rates

Discuss
Answer: (c).It exerts significant influence on rate quoted by lead underwriters Explanation:The absence of retrocessional support in a hard market exerts significant influence on the rate quoted by lead underwriters, who are the primary reinsurers. This means that the lack of retrocessional support affects the pricing decisions made by lead underwriters in a challenging market environment.
Q50.
Why do ceding insurers protect the experience of their outward treaties in reciprocal trading?

a.

To increase the treaty capacity for hazardous risks

b.

To maintain a balanced exchange of treaties

c.

To maximize their net premiums and net profits

d.

To secure excess of loss cover for the treaty portfolio

Discuss
Answer: (c).To maximize their net premiums and net profits Explanation:Ceding insurers value their outward treaties and protect their experience by measures such as not utilizing the full treaty capacity for more hazardous risks. This protection is aimed at maximizing their net premiums and net profits.
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