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 2 of 16

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Q11.
What are non-proportional treaty accounts not subject to?

a.

Premium reserves

b.

Claim reserves

c.

Profit commission

d.

Tax regulations

Discuss
Answer: (c).Profit commission Explanation:Non-proportional treaty accounts are not subject to profit commission.
Q12.
How are premiums calculated in reinsurance agreements?

a.

Based on the ceding insurer's total net premium after ceding to proportional reinsurances

b.

Based on the reinsurer's total net premium after ceding to proportional reinsurances

c.

Based on a fixed percentage of the ceding insurer's total premium income

d.

Based on the reinsurer's estimated total premium income

Discuss
Answer: (a).Based on the ceding insurer's total net premium after ceding to proportional reinsurances Explanation:Premiums in reinsurance agreements are calculated at a rate specified in the contract, which is applied to the ceding insurer's total net premium after ceding to proportional reinsurances.
Q13.
How are premiums calculated in reinsurance agreements?What is the purpose of a deposit premium in reinsurance agreements?

a.

Based on the ceding insurer's total net premium after ceding to proportional reinsurancesTo cover minimum premium requirements

b.

Based on the reinsurer's total net premium after ceding to proportional reinsurancesTo ensure timely payment of premiums

c.

Based on a fixed percentage of the ceding insurer's total premium incomeTo account for estimated total net premium

d.

Based on the reinsurer's estimated total premium incomeTo provide additional coverage for high-risk policies

Discuss
Answer: (a).Based on the ceding insurer's total net premium after ceding to proportional reinsurancesTo cover minimum premium requirements Explanation:Premiums in reinsurance agreements are calculated at a rate specified in the contract, which is applied to the ceding insurer's total net premium after ceding to proportional reinsurances.A deposit premium in reinsurance agreements is paid to cover minimum premium requirements, and it is subject to adjustment when the ceding insurer's final premium income is known.
Q14.
In proportional treaty accounts, who is responsible for preparing the accounts?

a.

Reinsurer

b.

Ceding insurer

c.

Broker

d.

Regulatory bodies

Discuss
Answer: (b).Ceding insurer Explanation:In proportional treaty accounts, the responsibility for preparing the accounts lies with the ceding insurer. The ceding insurer possesses the necessary information regarding premiums, claims paid, reserves released, and retained amounts. As most treaties are "blind" and do not provide individual cession details to the reinsurer, the ceding insurer is responsible for compiling and providing the relevant account information to the reinsurer.
Q15.
What information is typically included in the quarterly or periodical accounts received by the reinsurer in proportional treaty accounts?

a.

Premiums, claims paid, reserves released, and retained amounts

b.

Individual cession details for each treaty

c.

Financial statements of the ceding insurer

d.

Investment income and exchange gains or losses

Discuss
Answer: (a).Premiums, claims paid, reserves released, and retained amounts Explanation:In proportional treaty accounts, the reinsurer receives quarterly or periodical accounts from the ceding insurer. These accounts typically include information such as premiums collected, claims paid, reserves released, and amounts retained by the ceding insurer. This information allows the reinsurer to monitor the development of treaty results and make informed decisions regarding the reinsurance business.
Q16.
Why is the quarterly accounting system considered advantageous in proportional treaty accounts?

a.

It reduces the administrative cost of producing accounts

b.

It allows for longer periods of cash flow and investment income

c.

It provides more accurate and detailed information to the reinsurer

d.

It ensures timely settlement of balances between the parties

Discuss
Answer: (c).It provides more accurate and detailed information to the reinsurer Explanation:The quarterly accounting system is considered advantageous in proportional treaty accounts for several reasons. Firstly, it allows the reinsurer to closely monitor the development of treaty results, which is crucial for making decisions related to the business. Secondly, it provides more timely and up-to-date information to the reinsurer, allowing for better risk assessment and management. Additionally, it ensures that balances and financial transactions are settled more promptly, reducing delays and potential losses for both parties.
Q17.
What stipulation is typically included in the treaty contract regarding the periodicity of accounts in proportional treaty accounts?

a.

Accounts should be rendered annually

b.

Accounts should be confirmed by the reinsurer within a month

c.

Accounts should be settled by the debtor party within three months

d.

Accounts should be rendered within three months of the close of the quarter

Discuss
Answer: (d).Accounts should be rendered within three months of the close of the quarter Explanation:In proportional treaty accounts, the treaty contract usually stipulates the periodicity at which accounts should be rendered by the ceding insurer. A common stipulation is that the accounts should be rendered within three months of the close of the quarter. This ensures that the reinsurer receives timely and up-to-date financial information for monitoring and decision-making purposes.
Q18.
What role do brokers play in reinsurance transactions?

a.

They arrange settlement between the parties

b.

They provide financial information to users

c.

They underwrite reinsurance contracts

d.

They regulate government bodies and taxation authorities

Discuss
Answer: (a).They arrange settlement between the parties Explanation:Brokers play a role in arranging the settlement between the ceding insurer and the reinsurer. This settlement process is part of the overall service provided by the broker. The broker ensures that the financial transactions and obligations between the parties are appropriately handled and resolved.
Q19.
Which type of reinsurance accounts are normally rendered on an "Accounts Year" basis?

a.

Fire and Accident Proportional Reinsurance

b.

Marine Proportional Reinsurance

c.

Non-Proportional Reinsurance

d.

Catastrophe Excess Reinsurance

Discuss
Answer: (a).Fire and Accident Proportional Reinsurance Explanation:The accounts for fire and accident proportional reinsurance are typically rendered on an "Accounts Year" basis. In these accounts, the premiums are usually shown at original gross rates, and the reinsurance commission rate is then applied.
Q20.
Which type of reinsurance accounts are normally rendered on an "Underwriting Year" basis?

a.

Fire and Accident Proportional Reinsurance

b.

Marine Proportional Reinsurance

c.

Non-Proportional Reinsurance

d.

Catastrophe Excess Reinsurance

Discuss
Answer: (b).Marine Proportional Reinsurance Explanation:The accounts for marine proportional reinsurance are normally rendered on an "Underwriting Year" basis. In these accounts, the premiums are usually shown net of acquisition costs, agency commission, brokerage, and any discount allowed to the insurer. Hence, the reinsurance commission will cover only the ceding insurer's expenses.
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