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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Methods of Reinsurance II MCQs | Page 9 of 10

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Q81.
What are the defects of the "risk attaching" basis?

a.

Long run-off and difficulty of assigning a claim to the proper excess of loss contract year.

b.

No portfolio taken over at inception, no portfolio withdrawn at cancellation, and no checking when a claim occurs to see when the policy was issued and what contract was affected.

c.

None of the above.

d.

Both a and b

Discuss
Answer: (a).Long run-off and difficulty of assigning a claim to the proper excess of loss contract year. Explanation:The defects of the "risk attaching" basis are the long run-off and the difficulty of assigning a claim to the proper excess of loss contract year.
Q82.
What are the defects of the "risk attaching" basis?What is the purpose of the specimen slip?

a.

Long run-off and difficulty of assigning a claim to the proper excess of loss contract year.To provide insight into the making of a slip used in placement and confirmation of reinsurance cover.

b.

No portfolio taken over at inception, no portfolio withdrawn at cancellation, and no checking when a claim occurs to see when the policy was issued and what contract was affected.To explain the different methods used for non-proportional reinsurances.

c.

None of the above.To discuss the headers used in a non-proportional slip.

d.

Both a and bTo provide a sample of a proportional slip.

Discuss
Answer: (a).Long run-off and difficulty of assigning a claim to the proper excess of loss contract year.To provide insight into the making of a slip used in placement and confirmation of reinsurance cover. Explanation:The defects of the "risk attaching" basis are the long run-off and the difficulty of assigning a claim to the proper excess of loss contract year.The purpose of including the specimen slip is to provide insight into the making of a slip used in placement and confirmation of reinsurance cover.
Q83.
Which of the following is correct with regards to catastrophe cover?

a.

It protects the insurer against known accumulations arising out of one event.

b.

At least one risk has to be involved in a single loss before the excess of loss is affected.

c.

The retention is normally more than the amount retained under each individual risk.

d.

The retention is normally less than the amount retained under each individual risk.

Discuss
Answer: (c).The retention is normally more than the amount retained under each individual risk. Explanation:Catastrophe cover is a type of non-proportional reinsurance that protects an insurer against a large number of losses arising from a single catastrophic event such as a hurricane, earthquake, or flood. The retention for catastrophe cover is typically higher than the retention for each individual risk because the reinsurer is assuming the risk of a large number of losses that could occur in a single catastrophic event. The excess of loss cover is triggered once the losses from the catastrophic event exceed the retention. Option a is incorrect because catastrophe cover protects against unknown accumulations arising out of a single event. Option b is incorrect because excess of loss cover is triggered when losses from a single catastrophic event exceed the retention, and it is not necessary for more than one risk to be involved in a single loss. Option d is incorrect because the retention for catastrophe cover is typically higher than the retention for each individual risk.
Q84.
What does excess of loss - Catastrophe cover protect the reinsured against?

a.

A single loss arising out of one event

b.

An aggregation of losses arising from multiple events

c.

Losses arising from any event, regardless of its cause

d.

Losses arising from risks covered under the underlying policy

Discuss
Answer: (b).An aggregation of losses arising from multiple events Explanation:Excess of loss - Catastrophe cover protects the reinsured against an aggregation of losses arising from a common event such as earthquake, flood, cyclone, riots, etc.
Q85.
Which method mitigates the impact of an unbearable net loss ratio?

a.

Stop loss method

b.

Aggregate excess of loss cover

c.

Umbrella excess of loss cover

d.

Whole Account Excess of Loss cover

Discuss
Answer: (a).Stop loss method Explanation:The Stop loss method mitigates the impact of an unbearable net loss ratio. This method applies to the loss ratio of the reinsured for any one class of business. This does not apply on the basis of per risk (working) or catastrophe.
Q86.
What does Aggregate excess of loss cover protect against?

a.

A single loss arising out of one event

b.

An aggregation of losses arising from multiple events

c.

Losses arising from any event, regardless of its cause

d.

Losses arising from risks covered under the underlying policy

Discuss
Answer: (b).An aggregation of losses arising from multiple events Explanation:Aggregate excess of loss cover would protect the total aggregate loss for a class of business.
Q87.
What does Whole Account Excess of Loss cover protect?

a.

A single risk or event

b.

The total aggregate loss for a class of business

c.

The whole business of the reinsured incorporating all classes of business

d.

Any gaps in the various reinsurance arrangements made by a reinsured

Discuss
Answer: (c).The whole business of the reinsured incorporating all classes of business Explanation:In Whole Account Excess of Loss cover, a single composite cover is installed for protecting at one go, the whole business of the reinsured incorporating all classes of business.
Q88.
What is the purpose of Umbrella excess of loss cover?

a.

To protect the reinsured against an aggregation of losses arising from a common event

b.

To protect the reinsured against losses arising from risks covered under the underlying policy

c.

To assist in covering any gap in the various reinsurance arrangements made by a reinsured

d.

To mitigate the impact of an unbearable net loss ratio

Discuss
Answer: (c).To assist in covering any gap in the various reinsurance arrangements made by a reinsured Explanation:Umbrella excess of loss cover is installed to assist to cover any gap in the various reinsurance arrangements made by a reinsured.
Q89.
What does non-proportional reinsurance protect?

a.

Risk exposure

b.

Loss as incurred by the reinsured

c.

The total aggregate loss for a class of business

d.

Losses arising from a common event

Discuss
Answer: (b).Loss as incurred by the reinsured Explanation:Non-proportional reinsurance does not protect risk exposure but protect loss as incurred by the reinsured.
Q90.
What happens to the cover in a non-proportional reinsurance after payment of loss?

a.

The cover increases

b.

The cover stays the same

c.

The cover depletes or ceases

d.

The reinsured receives a higher premium

Discuss
Answer: (c).The cover depletes or ceases Explanation:In practice, a non-proportional reinsurance provides that the cover would deplete or cease upon payment of loss.
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