Reinsurance Accounting MCQs
Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Reinsurance Accounting, 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 Reinsurance Accounting 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 Reinsurance Accounting mcq questions that explore various aspects of Reinsurance Accounting problems. Each MCQ is crafted to challenge your understanding of Reinsurance Accounting 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 Reinsurance Accounting MCQs are your pathway to success in mastering this essential IC85 Reinsurance Management topic.
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Reinsurance Accounting MCQs | Page 10 of 16
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Q91.
Which of the following reinsurance commission method is used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year?
Answer: (b).Sliding Scale of commission
Explanation:The sliding scale of commission is a reinsurance commission method used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year. This means that the commission rate varies or slides based on the performance of the treaty, specifically its loss ratio. As the loss ratio increases or decreases, the commission rate is adjusted accordingly.
Q92.
Which of the following reinsurance commission method is used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year?____________ is an additional percentage payable to a ceding insurer on profitable treaties in accordance with an agreed formula.
Answer: (b).Sliding Scale of commissionProfit commission
Explanation:The sliding scale of commission is a reinsurance commission method used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year. This means that the commission rate varies or slides based on the performance of the treaty, specifically its loss ratio. As the loss ratio increases or decreases, the commission rate is adjusted accordingly.Profit commission is an additional percentage payable to a ceding insurer on profitable treaties in accordance with an agreed formula. Profit commission serves as an incentive for ceding insurers to produce profitable business. When the treaty results in a profit, the ceding insurer receives an additional commission based on a predetermined formula or agreement. This encourages the ceding insurer to actively pursue and maintain profitable reinsurance treaties.
Q93.
When a reinsurer receives business as an inward retrocession, the reinsurer will allow the ceding insurer _____________ over and above any share of the original commission that he may pay.
Answer: (a).Overriding commission
Explanation:When a reinsurer receives business as an inward retrocession, the reinsurer will allow the ceding insurer overriding commission over and above any share of the original commission that he may pay. This means that in the case of inward retrocession, where a reinsurer receives business from another reinsurer, the reinsurer will provide an additional commission known as overriding commission to the ceding insurer. This overriding commission is in addition to any share of the original commission that the reinsurer may pay to the ceding insurer. It serves as an incentive or compensation for the ceding insurer in such reinsurance arrangements.
Q94.
For which of the following types of business will the accounting be rendered on an ‘Underwriting Year’ basis?
Answer: (c).Marine proportional reinsurance
Explanation:Accounting method used would depend on the specific characteristics of the reinsurance business. Proportional reinsurance involves sharing risks and premiums between the ceding insurer and the reinsurer based on a predetermined proportion. Marine proportional reinsurance refers to proportional reinsurance specifically applied to marine-related risks.
Q95.
For which of the following type of business will the accounting be rendered on an ‘Accounts Year’ basis?
Answer: (a).Fire and accident proportional reinsurance
Explanation:The accounting for fire and accident proportional reinsurance is typically rendered on an 'Accounts Year' basis. In this type of reinsurance, the accounts are prepared based on a specific accounting year. The premiums are usually shown at original gross rates, and the reinsurance commission rate is then applied. This accounting approach allows for the proper assessment and evaluation of the financial performance and results of the fire and accident proportional reinsurance business over a specific accounting period.
Q96.
Which of the following statements about reinsurance accounting formats is correct?
Answer: (b).The financial account includes items related to the reinsurer's share of the technical result.
Explanation:In reinsurance accounting, the financial account includes items such as the balance brought forward from previous accounts, premium and loss reserves, interest, loss settlements made, cash loss credit, and the final balance due for settlement. On the other hand, the technical account shows items related to the reinsurer's share of the technical result for the period. While there is no universal standard format for rendering reinsurance accounts, these basic features are commonly included.
Q97.
Which of the following formulae is correct?
Answer: (d).Loss ratio = (Incurred losses/Earned premiums) x100
Explanation:Option d, Loss ratio = (Incurred losses/Earned premiums) x 100 represents the correct formula for the loss ratio calculation.
Q98.
Which part of the reinsurance account includes items such as premium and loss reserves, interest, and loss settlements?
Answer: (b).Financial account
Explanation:The financial account in reinsurance accounting includes various financial items such as premium and loss reserves, interest on reserves, loss settlements made, and other financial transactions. It provides a comprehensive overview of the financial aspects of the reinsurance agreement
Q99.
What is the purpose of reinsurance commission?
Answer: (b).To reimburse the ceding insurer for acquiring the business
Explanation:Reinsurance commission is an amount paid by the reinsurer to the ceding insurer as a percentage of the premium. The purpose of the reinsurance commission is to reimburse the ceding insurer for the expenses incurred in acquiring the business, including agency commission and expense of management. The ceding insurer invests time and resources in prospecting, issuing policies, and adjusting claims, which benefit the reinsurer indirectly. Therefore, the reinsurer compensates the ceding insurer through the reinsurance commission. Option b accurately describes the purpose of reinsurance commission. Options a, c, and d incorrectly describe the purpose or the recipient of the commission.
Q100.
How are premiums typically accounted for in reinsurance accounting?
Answer: (b).Net premium
Explanation:In reinsurance accounting, premiums are typically accounted for as net premiums. This means that the premiums are recorded after deducting any original acquisition costs, such as agency commission and other expenses incurred by the ceding insurer. Net premiums reflect the actual amount received by the ceding insurer for the reinsurance coverage.