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.

In this section, you'll find a wide range of Methods of Reinsurance II mcq questions that explore various aspects of Methods of Reinsurance II problems. Each MCQ is crafted to challenge your understanding of Methods of Reinsurance II 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 II MCQs are your pathway to success in mastering this essential IC85 Reinsurance Management topic.

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Q41.
How does the range of insurance business covered affect the rate?

a.

It decreases the rate

b.

It increases the rate

c.

It does not affect the rate

d.

It depends on the exclusions

Discuss
Answer: (b).It increases the rate Explanation:The range of insurance business covered affects the rate. Where a treaty covers a number of classes of business or where there is only little exclusion the risk assumed by the reinsurer would be greater.
Q42.
What is the importance of past experience to the reinsurer?

a.

It provides an indication of the amount of risk the reinsurer can expect to undertake for various levels of retention

b.

It helps the reinsurer to calculate the rate

c.

It provides an indication of the reinsured's profitability

d.

It helps the reinsurer to identify the exclusions

Discuss
Answer: (a).It provides an indication of the amount of risk the reinsurer can expect to undertake for various levels of retention Explanation:The past experience provides an indication of the amount of risk the reinsurer can expect to undertake for various levels of retention. The reinsured provides information covering a period of years stating his annual premium income and the number and cost of all claims which have exceeded the proposed retention.
Q43.
What is Burning Cost?

a.

The cost at which claims would equal the excess of loss reinsurance premium

b.

The amount paid by the reinsurer for each claim made by the reinsured

c.

The percentage of the insurer's gross premium income

d.

The cost of paying all claims during the year

Discuss
Answer: (a).The cost at which claims would equal the excess of loss reinsurance premium Explanation:Burning Cost refers to the cost at which claims would equal the excess of loss reinsurance premium.
Q44.
What is Burning Cost?What are Incurred But Not Reported (I.B.N.R.) claims?

a.

The cost at which claims would equal the excess of loss reinsurance premiumClaims that have already been reported by the reinsured

b.

The amount paid by the reinsurer for each claim made by the reinsuredClaims that are still outstanding and could be settled at a higher cost

c.

The percentage of the insurer's gross premium incomeClaims that have not yet been reported by the reinsured

d.

The cost of paying all claims during the yearClaims that are not covered by the reinsurance treaty

Discuss
Answer: (b).The cost at which claims would equal the excess of loss reinsurance premiumClaims that are still outstanding and could be settled at a higher cost Explanation:Burning Cost refers to the cost at which claims would equal the excess of loss reinsurance premium.Incurred But Not Reported (I.B.N.R.) claims are those claims that are still outstanding and could be settled at a higher cost.
Q45.
What is the basis used for all types of excess of loss treaties?

a.

Flat Premium

b.

Burning cost

c.

Flat Rate

d.

Catastrophe excess

Discuss
Answer: (c).Flat Rate Explanation:The reinsurer may quote a Flat Rate as a percentage which is applied to the gross premium income of the particular class of business. This basis is used for all types of excess of loss treaties – both “working” and “catastrophe”.
Q46.
What is the meaning of Rate on Line?

a.

The flat rate on ‘catastrophe’ covers

b.

The rate applied to the limit of cover

c.

The number of years in which the limit can be recouped

d.

The flat premium amount quoted

Discuss
Answer: (b).The rate applied to the limit of cover Explanation:When the rate is applied to the limit of cover it is known as “Rate on Line”. This assists the reinsurer to judge rating consistency as between various covers that he quotes.
Q47.
Why are catastrophe covers unsuitable for the burning cost method of rating?

a.

They are remote enough not to be affected in any normal year

b.

They are affected in any normal year

c.

They involve too much risk for the reinsurer

d.

They do not provide any income for the reinsurer

Discuss
Answer: (a).They are remote enough not to be affected in any normal year Explanation:Because catastrophe covers should be remote enough not to be affected in any normal year, they are completely unsuitable for the burning cost method of rating.
Q48.
What does the Rate on Line indicate?

a.

The market price for the cover

b.

The consistency of rating between various covers

c.

The amount of premium paid by the reinsurer

d.

The number of years since the last claim

Discuss
Answer: (b).The consistency of rating between various covers Explanation:The Rate on Line assists the reinsurer to judge rating consistency as between various covers that he quotes.
Q49.
What is an Incurred But Not Reported (I.B.N.R.) claim?

a.

A claim advised some years after the date of occurrence

b.

A claim that has already been paid by the reinsurer

c.

A claim that is reported on time by the reinsured

d.

A claim that is reported after the deadline

Discuss
Answer: (a).A claim advised some years after the date of occurrence Explanation:Most claims are advised some years after the date of occurrence. These are known as Incurred But Not Reported (I.B.N.R.) claims.
Q50.
What are the main factors in rating a catastrophe cover?

a.

The cover required and degree of exposure to natural perils

b.

The experience of losses in the past

c.

The premium collected over a period of 250 years

d.

Both a and c

Discuss
Answer: (d).Both a and c Explanation:The main factors in rating a catastrophe cover are the cover required and degree of exposure to natural perils and the premium collected over a period of 250 years.
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