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 3 of 16

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Q21.
What is the primary advantage of using a flat rate of commission for reinsurance accounting?

a.

Easy calculation and accounting

b.

Reflects the loss ratio of the treaty

c.

Provides flexibility for different types of business

d.

Allows for adjustments based on earned premiums

Discuss
Answer: (a).Easy calculation and accounting Explanation:Using a flat rate of commission for reinsurance accounting has the primary advantage of being easy to calculate and account for. With a fixed percentage applied to the premiums ceded, less returns and cancellations, the commission payable can be determined straightforwardly. This method simplifies the accounting process and ensures consistent commission calculations.
Q22.
What is the purpose of using a sliding scale commission for reinsurance accounting?

a.

Easy calculation and accounting

b.

Reflects the loss ratio of the treaty

c.

Provides flexibility for different types of business

d.

Allows for adjustments based on earned premiums

Discuss
Answer: (b).Reflects the loss ratio of the treaty Explanation:The purpose of using a sliding scale commission for reinsurance accounting is to reflect the loss ratio of the treaty. This method calculates the commission rate based on the percentage that the incurred losses bear to the earned premiums. By considering the actual loss experience of the treaty, the commission rate can be adjusted to align with the performance of the business.
Q23.
What is the purpose of the provisional commission in reinsurance accounting?

a.

To ensure timely payment of commission

b.

To calculate the actual rate of commission

c.

To stabilize the results under a treaty

d.

To adjust the commission at the end of the treaty period

Discuss
Answer: (c).To stabilize the results under a treaty Explanation:The purpose of the provisional commission in reinsurance accounting is to stabilize the results under a treaty. As the actual rate of commission cannot be determined until the end of the year, a provisional commission is charged based on an agreed midpoint between the minimum and maximum commission. This provisional commission helps balance the profitability for the reinsurer in both good and bad years, ensuring a more stable outcome.
Q24.
What are earned premiums?

a.

Premiums ceded and included in the accounts for the year in question

b.

Premiums paid in advance for future years

c.

Premiums received from reinsurers

d.

Premiums received from policyholders after the year-end

Discuss
Answer: (a).Premiums ceded and included in the accounts for the year in question Explanation:Earned premiums are the premiums ceded and included in the accounts for the year in question.
Q25.
What is deducted from earned premiums?

a.

Premiums received from policyholders after the year-end

b.

Premiums paid in advance for future years

c.

Reserve for unexpired risks at the end of the current year

d.

Reserve for unexpired risks brought forward from the previous year

Discuss
Answer: (c).Reserve for unexpired risks at the end of the current year Explanation:The reserve for unexpired risks at the end of the current year is deducted from earned premiums.
Q26.
What are incurred losses?

a.

Losses paid and included in the accounts for the year in question

b.

Losses incurred but not yet paid

c.

Losses recovered from reinsurers

d.

Losses incurred in the previous year

Discuss
Answer: (a).Losses paid and included in the accounts for the year in question Explanation:Incurred losses are losses paid and included in the accounts for the year in question.
Q27.
When is the interest credited to reinsurers in treaties with provision for retention of reserves?

a.

In the quarter when the reserve is released

b.

In the quarter when the reserve is retained

c.

At the end of the treaty year

d.

At the beginning of the treaty year

Discuss
Answer: (a).In the quarter when the reserve is released Explanation:The interest is credited to reinsurers in the quarter when the reserve is released.
Q28.
How is the net return to the reinsurer affected by tax regulations?

a.

It increases the net return

b.

It decreases the net return

c.

It has no effect on the net return

d.

It depends on the specific tax regulations

Discuss
Answer: (b).It decreases the net return Explanation:The net return to the reinsurer is decreased as the interest is subject to tax as per local regulations.
Q29.
What is the nature of accounts under non-proportional treaties?

a.

They focus on premium and claim reserves

b.

They primarily deal with losses on a cash loss basis

c.

They involve profit commission calculations

d.

They require complex financial statements

Discuss
Answer: (b).They primarily deal with losses on a cash loss basis Explanation:Accounts under non-proportional treaties primarily deal with losses on a cash loss basis.
Q30.
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.
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