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 3 of 7

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Q21.
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.
Q22.
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.
Q23.
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.
Q24.
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.
Q25.
What is the primary purpose of controlling accumulation hazards in reinsurance?

a.

To mitigate the risks associated with earthquakes and storms

b.

To maximize profitability in catastrophic perils

c.

To ensure uniform exposures across different locations

d.

To minimize the impact of frequency, timing, and severity variations

Discuss
Answer: (a).To mitigate the risks associated with earthquakes and storms Explanation:The primary purpose of controlling accumulation hazards in reinsurance is to mitigate the risks associated with earthquakes, storms, tornados, and other catastrophic perils. By carefully managing exposures to these hazards, reinsurers can minimize potential losses and ensure the stability of their portfolios.
Q26.
What are some of the uses of the information produced from a statistical base in insurance and reinsurance?

a.

Production of accounts

b.

Production of marketing information

c.

Assessment of outstanding claims and IBNR reserves

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The information produced from a statistical base in insurance and reinsurance has multiple uses. It is used for the production of accounts, marketing information, and rating information. It is also utilized for assessing outstanding claims and Incurred But Not Reported (IBNR) reserves, as well as for financial planning purposes. These uses demonstrate the importance of a robust statistical system in supporting various aspects of insurance and reinsurance operations.
Q27.
What is the purpose of reconciling balances and reviewing cash flow in the context of evolving a statistical system?

a.

To assess profitability of outgoing treaties

b.

To analyze the portfolio underwritten and ascertain exposures

c.

To determine the aggregate loss amount due to a catastrophic event

d.

To obtain marketing information for outgoing treaties

Discuss
Answer: (b).To analyze the portfolio underwritten and ascertain exposures Explanation:Reconciling balances and reviewing cash flow in the context of evolving a statistical system serves the purpose of option b. It helps in analyzing the portfolio underwritten and ascertaining the exposures associated with the business. This step provides valuable insights into the financial performance and risks of the reinsurance operations.
Q28.
What type of information is required for retrocession treaties in the context of evolving a statistical system?

a.

Statistical and accounting requirements

b.

Large claims information

c.

Marketing information for outgoing treaties

d.

Aggregate loss amount due to a catastrophic event

Discuss
Answer: (a).Statistical and accounting requirements Explanation:Retrocession treaties in the context of evolving a statistical system require statistical and accounting requirements, as indicated by option a). Retrocession involves transferring a portion of the reinsurance risk to another reinsurer, and thus, specific statistical and accounting information is necessary to manage and analyze these treaty arrangements.
Q29.
In the case of _________________, all business exchanged with the insurer or reinsurer is summarised in a sheet, showing cessions on one side and matching acceptances on the other side.

a.

Reinsurance arrangement

b.

Reciprocal exchange

c.

Retrocession arrangement

d.

Cancellation of reinsurance agreement

Discuss
Answer: (b).Reciprocal exchange Explanation:In the case of a reciprocal exchange, all business exchanged with the insurer or reinsurer is summarized in a sheet. This means that both cessions (risks transferred to the reinsurer) and matching acceptances (risks accepted by the reinsurer) are recorded on the sheet. A reciprocal exchange refers to a reinsurance arrangement where two parties agree to exchange risks with each other. They both act as both a reinsurer and a ceding insurer, depending on the specific risks involved. This arrangement allows for a balanced and mutually beneficial exchange of risks between the parties involved.
Q30.
With the wider use of computers and telecommunications, there is a growing preference for simplified administration procedures in the reinsurance industry. This has led to:

a.

Increased paperwork for reinsurers and brokers

b.

Decreased administrative effort for insurers

c.

Higher reinsurance costs for insurers

d.

Slower communication between insurers and reinsurers

Discuss
Answer: (b).Decreased administrative effort for insurers Explanation:The use of computers and telecommunications allows insurers to produce reinsurance accounts themselves, resulting in a minimum cost and saving administrative effort for reinsurers and brokers.
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