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 11 of 16

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Q101.
What information is required to be monitored and maintained as per the Insurance Rules?

a.

Settlement of claims by the ceding insurer

b.

Security level of reinsurers

c.

Premium payments made by the reinsurer

d.

Profit commissions earned from reinsurance treaties

Discuss
Answer: (b).Security level of reinsurers Explanation:According to the Insurance Rules, information on the security level of reinsurers is required to be monitored and maintained. This helps in assessing the financial strength and reliability of the reinsurers with whom reinsurance treaties are entered into.
Q102.
What information is required to be monitored and maintained as per the Insurance Rules?What is the purpose of reporting total placement to each reinsurer to the IRDA?

a.

Settlement of claims by the ceding insurerTo ensure compliance with regulatory requirements

b.

Security level of reinsurersTo track the payment of claims by the reinsurer

c.

Premium payments made by the reinsurerTo assess the profitability of reinsurance arrangements

d.

Profit commissions earned from reinsurance treatiesTo maintain records of facultative reinsurance ceded and accepted

Discuss
Answer: (b).Security level of reinsurersTo ensure compliance with regulatory requirements Explanation:According to the Insurance Rules, information on the security level of reinsurers is required to be monitored and maintained. This helps in assessing the financial strength and reliability of the reinsurers with whom reinsurance treaties are entered into.Reporting the total placement to each reinsurer to the IRDA helps in ensuring compliance with regulatory requirements. It enables the regulatory authority to monitor the reinsurance activities of insurers and assess their adherence to the prescribed guidelines and regulations.
Q103.
What is the purpose of convergence to International Financial Reporting Standards (IFRS)?

a.

To align Indian accounting standards with international standards

b.

To reduce the reporting burden for Indian multinational companies

c.

To attract foreign capital at a lower cost

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Convergence to IFRS aims to align Indian accounting standards with international standards, reduce the reporting burden for Indian multinational companies, and enhance their ability to raise and attract foreign capital at a lower cost. It brings Indian accounting standards in line with the more stringent and transparent Generally Accepted Accounting Standards (GAAP) of the US.
Q104.
Which organization has planned the convergence of Indian accounting standards with IFRS?

a.

Institute of Chartered Accountants of India (ICAI)

b.

Insurance Regulatory and Development Authority ( IRDA )

c.

International Accounting Standards Board ( IASB )

d.

Generally Accepted Accounting Principles (GAAP)

Discuss
Answer: (a).Institute of Chartered Accountants of India (ICAI) Explanation:The Institute of Chartered Accountants of India (ICAI) has planned the convergence of Indian accounting standards with the International Financial Reporting Standards (IFRS). ICAI has worked in defining accounting standards for regulatory compliance by insurers in India and has submitted its recommendations to the IRDA for convergence.
Q105.
What is the impact of convergence to IFRS on non-life insurance and reinsurance business?

a.

Increased transparency and stringent reporting requirements

b.

Reduced disclosure requirements for reinsurance transactions

c.

Alignment with the Generally Accepted Accounting Principles (GAAP) of the US

d.

Enhanced ability to attract foreign capital for Indian insurers

Discuss
Answer: (a).Increased transparency and stringent reporting requirements Explanation:Convergence to IFRS has a significant impact on non-life insurance and reinsurance business by increasing transparency and imposing more stringent reporting requirements. It ensures both gross and net presentation of reinsurance transactions and requires the impairment of reinsurance assets to be tested. Prior to IFRS, reinsurance transactions were presented net and not distinctly.
Q106.
What is the requirement of IFRS regarding the presentation of reinsurance transactions?

a.

Reinsurance assets should be offset against related reinsurance liabilities

b.

Income or expense from reinsurance contracts should be offset against income or expense from related insurance contracts

c.

Reinsurer's share of policy liabilities should be presented as an asset

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:IFRS requires both gross and net presentation of reinsurance transactions. It stipulates that reinsurance assets should not be offset against related reinsurance liabilities, income or expense from reinsurance contracts should not be offset against income or expense from related insurance contracts, and the reinsurer's share of policy liabilities should be presented as an asset.
Q107.
What disclosure requirements are required by IRDA for insurers under IFRS?

a.

Process of determining assumptions of assets and liabilities

b.

Insurance risk, sensitivity to insurance risks, and exposure to market risk

c.

Key performance indicators such as lapsation rate, claim ratio, and premium collection

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:IRDA requires insurers to disclose the process of determining assumptions of assets and liabilities, the insurance risk, sensitivity to insurance risks, concentration of insurance risk, exposure to market risk under embedded derivatives, and key performance indicators such as lapsation rate, claim ratio, and premium collection. These disclosure requirements are in line with the guidelines of the International Financial Reporting Standards (IFRS).
Q108.
What is a major problem faced by a reinsurer when closing proportional treaty accounts?

a.

Difficulty in estimating outstanding provisions for claims

b.

Delays in the preparation and rendering of treaty accounts

c.

Inability to match accounted figures with treaty year results

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Closing proportional treaty accounts poses a major problem for a reinsurer due to the difficulty in estimating outstanding provisions for claims, delays in the preparation and rendering of treaty accounts, and the challenge of matching accounted figures with treaty year results. These factors make it challenging for the reinsurer to ascertain the profit or loss on each acceptance when closing the financial year.
Q109.
How do reinsurers overseas typically operate non-proportional accounts?

a.

On a funded basis

b.

With immediate transfer of surplus to revenue reserves

c.

By estimating outstanding claims for many years

d.

By matching accounted figures with treaty year results

Discuss
Answer: (a).On a funded basis Explanation:Reinsurers overseas typically operate their non-proportional accounts on a funded basis. Each year, the fund is examined to ensure its adequacy with regard to outstanding claims. Any deficit in the fund is replaced by a transfer from revenue reserves. This approach helps address the challenge of long-duration claims reporting, where the eventual cost of claims may not be known for many years.
Q110.
When is a surplus normally removed from a non-proportional treaty account?

a.

Immediately after the year to which it relates

b.

After one year from the year to which it relates

c.

After two years from the year to which it relates

d.

After three years from the year to which it relates

Discuss
Answer: (d).After three years from the year to which it relates Explanation:A surplus in a non-proportional treaty account is not normally removed from the fund until three years after the year to which it relates. This timeframe allows sufficient information to be available before transferring the surplus to revenue reserves. The long duration of claims reporting necessitates this waiting period to ensure accurate assessment of surplus.
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