Law and Clauses Relating to Reinsurance Contracts MCQs

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

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Law and Clauses Relating to Reinsurance Contracts MCQs | Page 12 of 19

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Q111.
What is the definition of "ultimate net loss" in reinsurance?

a.

The total amount paid by the ceding insurer for a loss occurrence

b.

The net loss after deducting all expenses of the insurer

c.

The recoverable amount under an excess of loss treaty

d.

The final determined loss amount after all recoveries

Discuss
Answer: (c).The recoverable amount under an excess of loss treaty Explanation:"Ultimate net loss" refers to the amount of the ceding insurer's loss that is eligible for recovery under the terms of an excess of loss treaty. It represents the recoverable amount after deducting salvages, recoveries, and other deductions.
Q112.
What provision allows claims to be settled to the ceding insurer before determining the ultimate net loss?

a.

Ground up loss provision

b.

Net Retained Lines provision

c.

Recovery deduction provision

d.

Loss settlement provision

Discuss
Answer: (d).Loss settlement provision Explanation:Within the clause, there is a specific provision that allows claims to be settled to the ceding insurer before determining the ultimate net loss. This provision ensures that the ceding insurer can receive settlements even before all recoveries have been made.
Q113.
Which items are deducted from the loss to determine the liability under the ultimate net loss provision?

a.

Office expenses and salaries of the insurer

b.

Expenses of litigation and loss expenses of the insurer

c.

Salvages, recoveries, and underlying reinsurances

d.

Payments recovered or received subsequent to the loss settlement

Discuss
Answer: (c).Salvages, recoveries, and underlying reinsurances Explanation:Under the ultimate net loss provision, salvages, recoveries from all reinsurances and retrocessions, and underlying reinsurances are deducted from the loss to arrive at the liability amount. This deduction is made to determine the net amount eligible for recovery.
Q114.
Which items are deducted from the loss to determine the liability under the ultimate net loss provision?When can a recovery be made under the ultimate net loss provision?

a.

Office expenses and salaries of the insurerOnly after the ceding insurer's ultimate net loss has been ascertained

b.

Expenses of litigation and loss expenses of the insurerOnly after all expenses of litigation have been settled

c.

Salvages, recoveries, and underlying reinsurancesOnly after deducting office expenses and salaries of the insurer

d.

Payments recovered or received subsequent to the loss settlementOnly after all necessary adjustments have been made by the parties

Discuss
Answer: (b).Salvages, recoveries, and underlying reinsurancesOnly after the ceding insurer's ultimate net loss has been ascertained Explanation:Under the ultimate net loss provision, salvages, recoveries from all reinsurances and retrocessions, and underlying reinsurances are deducted from the loss to arrive at the liability amount. This deduction is made to determine the net amount eligible for recovery.The ultimate net loss provision does not prevent a recovery from being made until the ceding insurer's ultimate net loss has been ascertained. This means that recoveries can be made even before the final determination of the ultimate net loss, allowing for timely settlements to the ceding insurer.
Q115.
What is the purpose of incorporating a "hours clause" in the definition of a loss occurrence for excess of loss reinsurance?

a.

To limit the duration of a loss occurrence to a specific number of hours

b.

To determine the geographical area of a loss occurrence

c.

To ensure that only one individual loss is included in each occurrence

d.

To establish a time limitation for specific perils in different regions

Discuss
Answer: (c).To ensure that only one individual loss is included in each occurrence Explanation:The purpose of incorporating a "hours clause" is to define one event or loss occurrence precisely and avoid including the same individual loss in multiple occurrences. The hours clause specifies a time limitation (commonly 72 consecutive hours) within which losses must occur to be considered part of the same occurrence.
Q116.
What is the duration and extent of a loss occurrence for hurricanes, typhoons, windstorms, rainstorms, hailstorms, and tornadoes?

a.

24 consecutive hours

b.

48 consecutive hours

c.

72 consecutive hours

d.

96 consecutive hours

Discuss
Answer: (c).72 consecutive hours Explanation:The duration and extent of a loss occurrence for hurricanes, typhoons, windstorms, rainstorms, hailstorms, and tornadoes is typically 72 consecutive hours. Any individual losses arising within this timeframe from these perils would be considered part of the same occurrence.
Q117.
How long is the duration and area limitation for riots, civil commotions, and malicious damage in a loss occurrence?

a.

24 consecutive hours and within the limits of any one city

b.

48 consecutive hours and within the limits of any one state

c.

72 consecutive hours and within the limits of any one state

d.

168 consecutive hours and within the limits of any one state

Discuss
Answer: (d).168 consecutive hours and within the limits of any one state Explanation:The duration and area limitation for riots, civil commotions, and malicious damage in a loss occurrence is 168 consecutive hours and within the limits of any one state. This means that losses occurring within a specific state during a continuous period of 168 hours would be considered part of the same occurrence.
Q118.
What is the duration of a loss occurrence for earthquakes, seaquakes, tidal waves, and volcanic eruptions?

a.

24 consecutive hours

b.

48 consecutive hours

c.

72 consecutive hours

d.

96 consecutive hours

Discuss
Answer: (c).72 consecutive hours Explanation:The duration of a loss occurrence for earthquakes, seaquakes, tidal waves, and volcanic eruptions is typically 72 consecutive hours. Individual losses resulting from these perils within this timeframe would be considered part of the same occurrence.
Q119.
What happens to individual losses occurring outside the specified period or areas of a loss occurrence?

a.

They are excluded from the loss occurrence

b.

They are considered part of a separate loss occurrence

c.

They are subject to a separate deductible

d.

They are covered under a different type of reinsurance agreement

Discuss
Answer: (a).They are excluded from the loss occurrence Explanation:Individual losses occurring outside the specified period or areas of a loss occurrence are excluded from that particular loss occurrence. Only losses that fall within the defined duration and geographical limitations are considered part of the occurrence.
Q120.
In excess of loss reinsurances, how are occupational disease claims typically aggregated?

a.

Each employee's claim is considered a separate occurrence

b.

Claims are aggregated based on the insured's policy period

c.

Claims are aggregated based on the number of employees affected

d.

Each disease contracted by an employee is considered a separate occurrence

Discuss
Answer: (b).Claims are aggregated based on the insured's policy period Explanation:Occupational disease claims in excess of loss reinsurances are typically aggregated into one occurrence for all employees of the insured who contract the same disease during one original policy period. This means that claims arising from occupational diseases within a specific policy period are treated as a single occurrence.
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