Methods of Reinsurance I MCQs

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

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Methods of Reinsurance I MCQs | Page 1 of 10

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Q1.
What is proportional reinsurance?

a.

A type of reinsurance where the reinsurer shares the liabilities of the insurer in the same proportion as agreed in the treaty.

b.

A type of reinsurance where the reinsurer covers only a specific type of risk.

c.

A type of reinsurance where the reinsurer provides coverage for all risks falling within the scope of the agreement.

d.

A type of reinsurance where the reinsurer shares only the premiums of the insurer, not the liabilities.

Discuss
Answer: (a).A type of reinsurance where the reinsurer shares the liabilities of the insurer in the same proportion as agreed in the treaty. Explanation:Proportional reinsurance is a type of reinsurance where the reinsurer shares the liabilities of the insurer in the same proportion as agreed in the treaty, along with sum insured, premiums, and claims.
Q2.
What are the two types of proportional reinsurance?

a.

Surplus and quota share reinsurance.

b.

Facultative and treaty reinsurance.

c.

Retrocession and obligatory reinsurance.

d.

Catastrophic and excess of loss reinsurance.

Discuss
Answer: (a).Surplus and quota share reinsurance. Explanation:The two types of proportional reinsurance are surplus reinsurance and quota share reinsurance.
Q3.
What is surplus reinsurance?

a.

The original insurer decides what part of the original insurance he wishes to retain for his own account and reinsures the balance with a reinsurer.

b.

The reinsurer covers only a specific type of risk.

c.

The reinsurer provides coverage for all risks falling within the scope of the agreement.

d.

The reinsurer covers the entire liability of the insurer.

Discuss
Answer: (a).The original insurer decides what part of the original insurance he wishes to retain for his own account and reinsures the balance with a reinsurer. Explanation:In surplus reinsurance, the original insurer decides what part of the original insurance he wishes to retain for his own account and reinsures (cedes) the balance with a reinsurer.
Q4.
How are premiums and losses shared in surplus reinsurance?

a.

In the proportion that the ceding insurer’s retention and the reinsurer’s share bear to the sum insured of the original insurance.

b.

Equally between the ceding insurer and the reinsurer.

c.

Based on the amount of premiums paid by the ceding insurer.

d.

Based on the amount of losses incurred by the reinsurer.

Discuss
Answer: (a).In the proportion that the ceding insurer’s retention and the reinsurer’s share bear to the sum insured of the original insurance. Explanation:In surplus reinsurance, premiums and losses are shared in the proportion that the ceding insurer’s retention and the reinsurer’s share bear to the sum insured of the original insurance.
Q5.
What is the ceding insurer’s retention in surplus reinsurance?

a.

The limit of liability which the ceding insurer wishes to retain on any one risk or class of risks.

b.

The amount of premium paid by the ceding insurer.

c.

The amount of loss incurred by the ceding insurer.

d.

The maximum limit of liability for the reinsurer.

Discuss
Answer: (a).The limit of liability which the ceding insurer wishes to retain on any one risk or class of risks. Explanation:In surplus reinsurance, the ceding insurer’s retention is the limit of liability which the ceding insurer wishes to retain on any one risk or class of risks. This limit is decided by the ceding insurer.
Q6.
Which of the following describes proportional reinsurance?

a.

The reinsurer assumes all the liabilities of the insurer

b.

The reinsurer shares liabilities of the insurer along with sum insured, premiums, and claims in the same proportion as per agreement in the treaty

c.

The reinsurer accepts only a specific risk of a specific insured

d.

The reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement

Discuss
Answer: (b).The reinsurer shares liabilities of the insurer along with sum insured, premiums, and claims in the same proportion as per agreement in the treaty Explanation:Proportional reinsurance involves sharing the liabilities of the insurer with the reinsurer in the same proportion as per the agreement in the treaty.
Q7.
Which of the following statements is true about surplus reinsurance?

a.

The reinsurer assumes all the liabilities of the insurer

b.

The original insurer decides what part of the original insurance he wishes to retain for his own account and reinsures the balance with a reinsurer

c.

The reinsurer automatically accepts a certain liability for all risks falling within the scope of the agreement

d.

The ceding insurer may cede risks of any agreed class of insurance which the reinsurer must accept if ceded

Discuss
Answer: (b).The original insurer decides what part of the original insurance he wishes to retain for his own account and reinsures the balance with a reinsurer Explanation:In surplus reinsurance, the original insurer decides what part of the original insurance he wishes to retain for his own account and reinsures (cedes) the balance with a reinsurer.
Q8.
Which of the following methods can assist in improving combined ratio?

a.

Retrocession

b.

Quota share reinsurance

c.

Facultative obligatory treaty

d.

Proportional reinsurance, if carefully structured

Discuss
Answer: (d).Proportional reinsurance, if carefully structured Explanation:Proportional methods, if carefully structured, can assist in improving combined ratio over a period of time.
Q9.
Which of the following methods can assist in improving combined ratio?What is proportional reinsurance?

a.

RetrocessionWhen the reinsurer shares the liabilities of the insurer along with sum insured, premiums and claims in the same proportion as per agreement in the treaty.

b.

Quota share reinsuranceWhen the reinsurer only shares the liabilities of the insurer for premiums and claims.

c.

Facultative obligatory treatyWhen the reinsurer only shares the liabilities of the insurer for claims.

d.

Proportional reinsurance, if carefully structuredNone of the above.

Discuss
Answer: (b).Proportional reinsurance, if carefully structuredWhen the reinsurer shares the liabilities of the insurer along with sum insured, premiums and claims in the same proportion as per agreement in the treaty. Explanation:Proportional methods, if carefully structured, can assist in improving combined ratio over a period of time.Proportional reinsurance is when the reinsurer shares the liabilities of the insurer along with sum insured, premiums, and claims in the same proportion as per agreement in the treaty.
Q10.
What are the two types of proportional reinsurance?

a.

Surplus reinsurance and quota share reinsurance.

b.

Retrocession and treaty reinsurance.

c.

Facultative and obligatory treaty reinsurance.

d.

None of the above.

Discuss
Answer: (a).Surplus reinsurance and quota share reinsurance. Explanation:The two types of proportional reinsurance are surplus reinsurance and quota share reinsurance.
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