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.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Reinsurance Accounting. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

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Reinsurance Accounting MCQs | Page 16 of 16

Discover more Topics under IC85 Reinsurance Management

Q151.
What law and regulation govern the use of foreign exchange in respect of insurance and reinsurance transactions overseas in India?

a.

Insurance Act 1938

b.

Companies Act 1956

c.

Foreign Exchange Management Act, 2000

d.

Income Tax Act 1961

Discuss
Answer: (c).Foreign Exchange Management Act, 2000 Explanation:In India, the use of foreign exchange in respect of insurance and reinsurance transactions overseas is governed by the Foreign Exchange Management Act, 2000.
Q152.
Who reviews and approves the reinsurance arrangements of the GIC Re?

a.

Reserve Bank of India

b.

Government of India

c.

Insurance Regulatory and Development Authority of India

d.

Securities and Exchange Board of India

Discuss
Answer: (b).Government of India Explanation:The reinsurance arrangements of the GIC Re are reviewed annually and approved by the Government of India.
Q153.
Which regulatory authority grants permission to GIC Re as an authorized dealer to arrange remittances of foreign exchange for reinsurance arrangements?

a.

Reserve Bank of India

b.

Insurance Regulatory and Development Authority of India

c.

Securities and Exchange Board of India

d.

Foreign Exchange Management Authority of India

Discuss
Answer: (a).Reserve Bank of India Explanation:Permission is granted by the Reserve Bank of India to GIC Re as an authorized dealer to arrange remittances of foreign exchange in respect of their reinsurance arrangements. This indicates that the Reserve Bank of India is the regulatory authority responsible for granting such permission in the context of reinsurance arrangements involving GIC Re.
Q154.
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?

a.

Flat rate of commission

b.

Sliding Scale of commission

c.

Overriding commission

d.

Profit commission

Discuss
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.
Q155.
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.

a.

Flat rate of commissionOverriding commission

b.

Sliding Scale of commissionBrokerage

c.

Overriding commissionProfit commission

d.

Profit commissionFlat rate commission

Discuss
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.
Q156.
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.

a.

Overriding commission

b.

Brokerage

c.

Profit commission

d.

Flat rate commission

Discuss
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.
Q157.
For which of the following types of business will the accounting be rendered on an ‘Underwriting Year’ basis?

a.

Fire and accident proportional reinsurance

b.

Fire and accident non proportional reinsurance

c.

Marine proportional reinsurance

d.

Marine non proportional basis

Discuss
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.
Q158.
Which of the following formulae is correct?

a.

Loss ratio = (Earned premiums/Incurred losses) x100

b.

Loss ratio = (Incurred losses/Incoming premiums) x100

c.

Loss ratio = (Incurred losses/Outgoing premium reserve) x100

d.

Loss ratio = (Incurred losses/Earned premiums) x100

Discuss
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.
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