Processing Information for Reinsurance Decisions MCQs

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

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Processing Information for Reinsurance Decisions MCQs | Page 2 of 7

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Q11.
What factors should be considered when tendering a provisional notice of cancellation to the ceding insurer?

a.

Current trend of business

b.

Other business from the insurer

c.

Overall relationship

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:When considering the tendering of a provisional notice of cancellation to the ceding insurer, the underwriter should take into account the current trend of business, other business from the insurer, overall relationship, and any other special considerations. These factors help determine the appropriate course of action.
Q12.
How long is the typical monitoring period to assess the quality of a treaty?

a.

1 to 2 years

b.

2 to 3 years

c.

3 to 4 years

d.

4 to 5 years

Discuss
Answer: (c).3 to 4 years Explanation:The quality of a treaty is typically assessed over a period of 3 to 4 years. During this time, the underwriter closely monitors the results and performance of the treaty, allowing for a more comprehensive evaluation of its effectiveness and profitability.
Q13.
What information is summarized in a sheet for treaties with reciprocal exchange?

a.

Cessions and acceptances

b.

Premiums and commissions

c.

Incurred claims and net results

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:In treaties with reciprocal exchange, a summary sheet is prepared that shows cessions on one side and matching acceptances on the other side. This sheet includes information such as cessions, acceptances, premiums, commissions, incurred claims, and net results for each contract year. It provides an overview of the historical exchange of results and helps assess the impact of changes in the rate of exchange.
Q14.
What factors are considered when reviewing excess of loss reinsurance?

a.

Validity of assumptions

b.

GNPI (Gross Net Premium Income)

c.

Adequacy of rate

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:When reviewing excess of loss reinsurance, the underwriter pays due regard to factors such as the validity of assumptions made during acceptance, GNPI (Gross Net Premium Income), and the adequacy of the rate. These considerations ensure that the reinsurance terms align with the intended risk coverage and pricing.
Q15.
What actions should be taken when a provisional notice of cancellation is given by the ceding insurer?

a.

Conduct a review of the terms for the ensuring year

b.

Decide on continuation with the business

c.

Give a definite notice of cancellation

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:When a provisional notice of cancellation is given by the ceding insurer, several actions should be taken. These include conducting a review of the terms for the ensuring year, deciding on continuation with the business, and providing a definite notice of cancellation if necessary. Proper communication and coordination between the reinsurer and ceding insurer are crucial during this process.
Q16.
How do reinsurers estimate outstanding losses for acceptances?

a.

Estimated losses as advised by the ceding insurer

b.

Latest available date plus large losses intimated subsequently

c.

Provision for portfolio entry in the treaty

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Reinsurers estimate outstanding losses for acceptances using various methods. These include considering estimated losses as advised by the ceding insurer, incorporating the latest available date plus large losses intimated subsequently, and including a provision for portfolio entry in the treaty. These methods are employed to make reasonably accurate estimates of outstanding losses.
Q17.
Which method can be used to estimate outstanding claims if renewal statistics information is provided?

a.

Estimated losses as advised by the ceding insurer

b.

Trend of incurred claims ratios

c.

Provision for claims incurred but not reported (IBNR)

d.

Deducting paid claims for the year

Discuss
Answer: (b).Trend of incurred claims ratios Explanation:When renewal statistics information is provided by the ceding insurer, the trend of incurred claims ratios can be used to estimate outstanding claims for the current year. By analyzing the historical data and trends, the underwriter can make a provision for outstanding claims after deducting the paid claims for the year.
Q18.
What does IBNR stand for in the context of estimating outstanding claims?

a.

Insured But Not Renewed

b.

Incurred But Not Reported

c.

International Business and Negotiation Rights

d.

Individual Business Non-Renewable

Discuss
Answer: (b).Incurred But Not Reported Explanation:IBNR stands for Incurred But Not Reported. When estimating outstanding claims, the underwriter may choose to make an additional "ad hoc" provision for claims that have been incurred but not yet reported. This provision, typically a percentage of outstanding claims, accounts for potential future claim payments.
Q19.
Why is it important to combine different methods and maintain consistency in making provisions for outstanding losses?

a.

To ensure accurate estimation of outstanding losses

b.

To meet regulatory requirements

c.

To minimize the impact of large losses

d.

To simplify the accounting process

Discuss
Answer: (a).To ensure accurate estimation of outstanding losses Explanation:Combining different methods and maintaining consistency in making provisions for outstanding losses helps ensure reasonable and acceptable procedures for estimating the actual amount of outstanding losses. Since no single method is entirely satisfactory, employing a combination of methods allows for a more accurate estimation and reduces potential errors or biases in the estimation process.
Q20.
What is the purpose of making an additional provision for claims incurred but not reported (IBNR)?

a.

To account for outstanding claims reported after the accounting year

b.

To compensate for claims that have been overestimated

c.

To provide additional profit for the reinsurer

d.

To adjust for discrepancies in premium calculations

Discuss
Answer: (a).To account for outstanding claims reported after the accounting year Explanation:The purpose of making an additional provision for claims incurred but not reported (IBNR) is to account for outstanding claims that have been incurred but not yet reported by the end of the accounting year. By including this provision, reinsurers can ensure that they have accounted for potential future claim payments that may arise from these unreported claims, enhancing the accuracy of their financial statements.
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