Methods of Reinsurance II MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Methods of Reinsurance II, 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 II MCQs are designed to help you grasp the core concepts and excel in solving problems.

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Methods of Reinsurance II MCQs | Page 1 of 10

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Q1.
What is non-proportional reinsurance also known as?

a.

Priority reinsurance

b.

Excess of Loss reinsurance

c.

Proportional reinsurance

d.

Underlying reinsurance

Discuss
Answer: (b).Excess of Loss reinsurance Explanation:Non-proportional reinsurance is also known as Excess of Loss reinsurance, which involves the reinsurer agreeing to indemnify the reinsured for losses that exceed a specified monetary amount identified by the reinsured.
Q2.
What does XL stand for?

a.

Excess of Loss

b.

Proportional premium

c.

Original sum insured

d.

Underlying

Discuss
Answer: (a).Excess of Loss Explanation:XL is the abbreviated form for ‘excess of loss’, which is a type of non-proportional reinsurance.
Q3.
What is the deductible under an excess of loss reinsurance contract?

a.

The amount of loss being reinsured

b.

The total sum insured

c.

The premium paid by the reinsured

d.

The proportion of the original risk ceded by the ceding insurer

Discuss
Answer: (a).The amount of loss being reinsured Explanation:The deductible is the specified monetary amount identified by the reinsured under an excess of loss reinsurance contract, and it represents the amount of loss being reinsured.
Q4.
Who bears the losses up to the deductible in an excess of loss reinsurance contract?

a.

The reinsurer

b.

The ceding insurer

c.

The insured

d.

The broker

Discuss
Answer: (b).The ceding insurer Explanation:The reinsured, which is the ceding insurer, bears all loss amounts up to the deductible under an excess of loss reinsurance contract.
Q5.
What is the status of the ceding insurer under an excess of loss reinsurance contract?

a.

Reinsured

b.

Reinsurer

c.

Insured

d.

Broker

Discuss
Answer: (a).Reinsured Explanation:The status of the ceding insurer under an excess of loss reinsurance contract is that of a reinsured. They seek protection to mitigate a loss beyond their chosen limit of loss retention.
Q6.
What is the status of the ceding insurer under an excess of loss reinsurance contract?What is the basis on which excess of loss reinsurance contracts are formed?

a.

ReinsuredProportional shares of the original sum insured, premium and claims on any one risk

b.

ReinsurerThe amount of loss being reinsured

c.

InsuredThe commission paid to agents and brokers

d.

BrokerThe territorial scope

Discuss
Answer: (b).ReinsuredThe amount of loss being reinsured Explanation:The status of the ceding insurer under an excess of loss reinsurance contract is that of a reinsured. They seek protection to mitigate a loss beyond their chosen limit of loss retention.Excess of loss reinsurance contracts are formed on the basis of the amount of loss being reinsured, unlike proportional reinsurance contracts which are based on proportional shares of the original sum insured, premium and claims on any one risk.
Q7.
What is non-proportional reinsurance also known as?

a.

Surplus Reinsurance

b.

Excess of Loss Reinsurance

c.

Quota Share Reinsurance

d.

Proportional Reinsurance

Discuss
Answer: (b).Excess of Loss Reinsurance Explanation:Non-proportional reinsurance is also known as Excess of Loss reinsurance.
Q8.
What is the deductible in an excess of loss reinsurance contract?

a.

The amount of loss being reinsured

b.

The amount of premium paid by the reinsurer

c.

The amount of loss paid by the reinsured

d.

The amount of risk ceded by the ceding insurer

Discuss
Answer: (a).The amount of loss being reinsured Explanation:Under Excess of Loss contracts, the reinsurer agrees to indemnify the reinsured for losses that exceed a specified monetary amount identified by the reinsured. Such an identified amount is the deductible also known as ‘excess’ or ‘priority’ or ‘underlying’.
Q9.
What is the status of the ceding insurer in an excess of loss reinsurance contract?

a.

Reinsurer

b.

Insured

c.

Reinsured

d.

Policyholder

Discuss
Answer: (c).Reinsured Explanation:The status of the ceding insurer is that of a reinsured. He does not cede risk and proportional premium. He seeks protection to mitigate a loss beyond his chosen limit of loss retention.
Q10.
What is the purpose of working (risk) excess of loss reinsurance?

a.

To limit losses that arise on the reinsured’s day-to-day operations

b.

To protect the reinsured against catastrophic events

c.

To protect the reinsured against adverse underwriting results

d.

To provide proportional coverage to the ceding insurer

Discuss
Answer: (a).To limit losses that arise on the reinsured’s day-to-day operations Explanation:Working (Risk) Excess of Loss (XL) reinsurance is intended to limit losses that arise on the reinsured’s day-to-day operations. It caters to the reinsured’s need for protection against number of losses that arise out of a single accident, occurrence or event.
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