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 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.
Q22.
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.
Q23.
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.
Q24.
When is the clean-cut method typically followed?

a.

In property proportional treaties

b.

In treaty contracts with settlement differences

c.

In reinsurance contracts with material differences in losses settled

d.

In treaties with withheld premium reserves

Discuss
Answer: (a).In property proportional treaties Explanation:The clean-cut method is usually followed in most property proportional treaties.
Q25.
What happens to premium reserves in the clean-cut method?

a.

They are withheld from outgoing reinsurers.

b.

They are adjusted based on settlement differences.

c.

They are released simultaneously with portfolio withdrawal.

d.

They are reserved for the next year's premium.

Discuss
Answer: (c).They are released simultaneously with portfolio withdrawal. Explanation:In the clean-cut method, premium reserves are released simultaneously with portfolio withdrawal, and the reserve corresponding to the premium of the previous year is withheld in the first account of the next year.
Q26.
What is the range of interest that ceding insurers allow reinsurers in treaties with provision for retention of reserves?

a.

1% to 2%

b.

2% to 4%

c.

4% to 6%

d.

6% to 8%

Discuss
Answer: (b).2% to 4% Explanation:Ceding insurers allow reinsurers interest ranging between 2% and 4% or slightly higher in treaties with provision for retention of reserves.
Q27.
What is added to incurred losses?

a.

Losses incurred in the previous year

b.

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

c.

Outstanding losses at the end of the current year

d.

Outstanding losses at the end of the previous year

Discuss
Answer: (c).Outstanding losses at the end of the current year Explanation:The outstanding losses at the end of the current year are added to incurred losses.
Q28.
What is the purpose of a provisional commission?

a.

To stabilize the results under a treaty

b.

To ensure timely payment of commission

c.

To maximize profits for the reinsurer

d.

To reduce the loss in bad years

Discuss
Answer: (b).To ensure timely payment of commission Explanation:The purpose of a provisional commission is to ensure timely payment of commission.
Q29.
How is the provisional commission determined?

a.

It is a fixed percentage of the earned premiums

b.

It is a fixed percentage of the incurred losses

c.

It is a mid point between the minimum and maximum commission

d.

It is based on the reinsurer's profit margin

Discuss
Answer: (c).It is a mid point between the minimum and maximum commission Explanation:The provisional commission is determined as a mid point between the minimum and maximum commission.
Q30.
What does a sliding scale of commission aim to do?

a.

Maximize profits for the reinsurer in good years

b.

Maximize profits for the ceding insurer in bad years

c.

Stabilize the results under a treaty

d.

Eliminate the need for provisional commission

Discuss
Answer: (c).Stabilize the results under a treaty Explanation:A sliding scale of commission aims to stabilize the results under a treaty.
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