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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Q51.
What are the two benefits derived from a reciprocal exchange of treaties?

a.

Increased stability in underwriting surplus and wider spread for net retained portfolio

b.

Increased profitability and improved balance in underwriting surplus

c.

Higher treaty capacity and greater stability in net premiums

d.

Balanced exchange of profit and improved spread for the insurer's portfolio

Discuss
Answer: (a).Increased stability in underwriting surplus and wider spread for net retained portfolio Explanation:The benefits derived from a reciprocal exchange of treaties are: (a) enabling the ceding insurer to add to their net premiums and net profits, and (b) providing a wider spread for the net retained portfolio of the insurer, resulting in greater stability in the underwriting surplus.
Q52.
In which lines of business is reciprocal reinsurance trading most prevalent?

a.

Fire and hull

b.

Property and casualty

c.

Life and health

d.

Specialty and reinsurance

Discuss
Answer: (a).Fire and hull Explanation:Reciprocal reinsurance trading is most prevalent in the fire and hull lines of business. It is not widely prevalent in other lines of business, although business of like type is commonly exchanged among insurers.
Q53.
In reciprocal reinsurance trading, what can be adjusted to keep the treaty exchanges balanced?

a.

Treaty capacity and profitability

b.

Commission, profit commission, and reciprocity terms

c.

Treaty limits and hazard risks

d.

Premium reciprocity and underwriting surplus

Discuss
Answer: (b).Commission, profit commission, and reciprocity terms Explanation:Ceding insurers are ready to offer adjustments in commission, profit commission, and reciprocity terms to keep the treaty exchanges balanced. These adjustments help in maintaining a balanced reciprocal trading relationship between the insurers involved.
Q54.
What is one potential danger in accepting large premium reciprocity from a treaty with low average profitability?

a.

Increased tax on profits

b.

Fluctuating profits

c.

Reduction of reserves

d.

Higher net premium ceded

Discuss
Answer: (b).Fluctuating profits Explanation:Accepting large premium reciprocity from a treaty with low average profitability can subject the profit to wide fluctuations. This indicates that the profitability of such a treaty may not be stable.
Q55.
What are the advantages of larger premium reciprocity for the ceding insurer?

a.

Increased reserves and reduced tax on profits

b.

Lower net premium and reduced reserves

c.

Greater tax on profits and larger reserves

d.

Lower brokerage cost and increased profit commission

Discuss
Answer: (a).Increased reserves and reduced tax on profits Explanation:Larger premium reciprocity adds to the net premium of the ceding insurer and has advantages such as the creation of larger reserves and reduction of tax on profits.
Q56.
According to IRDA regulations, which entities can Indian insurers write inward reinsurance business from?

a.

Only domestic insurers

b.

Only overseas insurers

c.

Both domestic and overseas insurers

d.

Only government insurers

Discuss
Answer: (c).Both domestic and overseas insurers Explanation:As per IRDA regulations, all life and non-life insurers in India can write inward reinsurance business from other domestic insurers and from overseas. This indicates that Indian insurers have the freedom to engage in inward reinsurance with both domestic and overseas entities.
Q57.
What is one requirement stated by IRDA regulations regarding the underwriting policy for inward reinsurance business?

a.

Filing changes to the underwriting policy

b.

Well-defined geographical scope

c.

Underwriting by persons with necessary knowledge and experience

d.

Mandatory retrocession to GIC Re and the Pools

Discuss
Answer: (c).Underwriting by persons with necessary knowledge and experience Explanation:According to IRDA regulations, insurers need to ensure that decisions on acceptance of reinsurance business are made by persons with necessary knowledge and experience. This requirement emphasizes the importance of expertise in underwriting inward reinsurance business.
Q58.
In inward reinsurance business, why is retrocession required?

a.

For formulating terms and condition of agreement

b.

To enable acceptance of economical lines

c.

For indemnifying excess of loss

d.

F or mutual exchange of risk

Discuss
Answer: (b).To enable acceptance of economical lines Explanation:Retrocession is required to enable the acceptance of economical lines in inward reinsurance business. Retrocession allows the accepting insurer or reinsurer to transfer a part of their acceptance to another reinsurer, thereby reducing their exposure and allowing them to accept larger lines of business that might otherwise be unaffordable or risky to retain solely. Retrocession helps in spreading the risk and making the acceptance of larger lines possible.
Q59.
Which entities are involved in writing inward reinsurance?

a.

Only professional reinsurers

b.

Only direct writing companies

c.

Both professional reinsurers and direct writing companies

d.

None of the above

Discuss
Answer: (c).Both professional reinsurers and direct writing companies Explanation:Inward reinsurance is written by both professional reinsurers and direct writing companies.
Q60.
What is the role of retrocession in the risk management process of reinsurers?

a.

It helps in formulating terms and conditions of agreements.

b.

It enables acceptance of economical lines.

c.

It indemnifies excess of loss.

d.

It facilitates the mutual exchange of risk.

Discuss
Answer: (b).It enables acceptance of economical lines. Explanation:Retrocession is an essential tool in the risk management process of reinsurers as it allows them to accept economical lines of business.
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