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 8 of 10

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Q71.
When does a proportional treaty begin?

a.

On the date agreed between the parties

b.

On the date when the ceding insurer accepts a risk

c.

At the end of the reinsurer's financial year

d.

On the date when the ceding insurer's new treaty agreement commences

Discuss
Answer: (a).On the date agreed between the parties Explanation:The treaty begins on the date agreed between the parties.
Q72.
What policies are covered under a proportional treaty?

a.

Only policies issued or renewed on or after the inception date of the treaty

b.

Only policies in mid-period

c.

Only policies already in force at the time of the treaty's inception

d.

All policies issued or renewed during the treaty period

Discuss
Answer: (a).Only policies issued or renewed on or after the inception date of the treaty Explanation:The reinsurer will cover only the policies issued or renewed on or after the inception date of the treaty as agreed with the ceding insurer and leave the policies already in force to be covered under the previous treaty.
Q73.
What is the alternative method for covering corresponding policies in force on the date when a new treaty agreement commences?

a.

Paying the reinsurer a portfolio entry premium

b.

Not covering these policies

c.

Covering these policies under the previous treaty

d.

Ceding these policies to another reinsurer

Discuss
Answer: (a).Paying the reinsurer a portfolio entry premium Explanation:The alternative method is for the ceding insurer to pay his new reinsurer an additional premium (called portfolio entry premium) to cover corresponding policies in force on the date when his new treaty agreement commenced.
Q74.
What happens to policies issued or renewed during a treaty period when the treaty is terminated?

a.

The reinsurer is no longer liable for any policies

b.

The reinsurer is liable only for policies that expire before the termination date

c.

The reinsurer will remain liable for all policies issued or renewed during the treaty period until these policies expire

d.

The ceding insurer will be solely liable for all policies issued or renewed during the treaty period

Discuss
Answer: (c).The reinsurer will remain liable for all policies issued or renewed during the treaty period until these policies expire Explanation:When a treaty is terminated, the reinsurer will remain liable for all policies issued or renewed during the treaty period until these policies expire, even though the expiration dates may be beyond the date of termination.
Q75.
What is the liability of the reinsurer under a proportional treaty?

a.

The reinsurer is not liable until the ceding insurer accepts a risk

b.

The reinsurer's liability commences before the ceding insurer accepts a risk

c.

The reinsurer is only liable for losses that occur after the cession was made

d.

The reinsurer's liability commences simultaneously with that of the ceding insurer

Discuss
Answer: (d).The reinsurer's liability commences simultaneously with that of the ceding insurer Explanation:Under a proportional treaty, the reinsurer's liability commences simultaneously with that of the ceding insurer.
Q76.
If a loss occurs before the cession is made, what is the reinsurer's liability?

a.

The reinsurer is not liable for any portion of the loss

b.

The reinsurer is liable only for the proportion that would have been ceded

c.

The reinsurer is liable for the entire loss

d.

The reinsurer's liability is limited to the amount of the ceding commission

Discuss
Answer: (b).The reinsurer is liable only for the proportion that would have been ceded Explanation:If a loss should occur before the cession was made, the reinsurer will still be liable for the proportion that would have been ceded.
Q77.
What is the portfolio withdrawal premium?

a.

A premium paid by the ceding insurer to the reinsurer to cover corresponding policies in force on the date when the new treaty agreement commenced

b.

A premium paid by the reinsurer to the ceding insurer to cut off the cover completely on the date of termination

c.

A premium paid by the reinsurer to the ceding insurer corresponding to polices that are running off

d.

A premium paid by the ceding insurer to the reinsurer to terminate the treaty immediately

Discuss
Answer: (c).A premium paid by the reinsurer to the ceding insurer corresponding to polices that are running off Explanation:The reinsurer may cut off the cover completely on the date of termination by paying to the ceding insurer a portfolio withdrawal premium corresponding to polices that are running off.
Q78.
Are the facilities of portfolio entry premium and portfolio withdrawal premium applicable to marine and aviation reinsurance business?

a.

Yes, they are applicable

b.

No, they are not applicable

c.

They are only applicable in certain situations

d.

None of the above

Discuss
Answer: (b).No, they are not applicable Explanation:The facility of portfolio entry premium and portfolio withdrawal premium do not apply to marine and aviation reinsurance business. They continue to be arranged on underwriting year basis.
Q79.
_________________ is a general practice under surplus treaties where the ceding insurer provides the reinsurers with a list detailing the risks ceded to the treaty.

a.

Ceding commission

b.

Bordereaux

c.

Ceding insurers retention

d.

Cessation

Discuss
Answer: (b).Bordereaux Explanation:Under surplus treaties, the ceding insurer provides the reinsurer with a list detailing the risks ceded to the treaty. This list is called a bordereau, and it contains information on the insured risks, such as the name and address of the insured, the sum insured, the premium charged, and the date of the policy. The reinsurer uses this information to assess the risks and calculate their share of the premium and the liability. The bordereau also enables the reinsurer to monitor the performance of the treaty and to identify any trends or issues that may arise.
Q80.
What is the purpose of a limit in a reinsurance treaty?

a.

To ensure the ceding insurer cannot accept inferior risk

b.

To ensure the reinsurer cannot accept more risk than agreed upon

c.

To limit the total amount of risk that can be ceded to the reinsurer

d.

To limit the amount of premium the ceding insurer has to pay to the reinsurer

Discuss
Answer: (c).To limit the total amount of risk that can be ceded to the reinsurer Explanation:A limit in a reinsurance treaty sets a cap on the amount of risk that can be ceded to the reinsurer, protecting them from excessive risk exposure.
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