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!

So, are you ready to put your Reinsurance Accounting knowledge to the test? Let's get started with our carefully curated MCQs!

Reinsurance Accounting MCQs | Page 4 of 16

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Q31.
What is the purpose of reinsurance commission?

a.

To reimburse the reinsurer for acquiring the business

b.

To reimburse the ceding insurer for acquiring the business

c.

To cover the administrative expenses of the reinsurer

d.

To cover the administrative expenses of the ceding insurer

Discuss
Answer: (b).To reimburse the ceding insurer for acquiring the business Explanation:Reinsurance commission is an amount paid by the reinsurer to the ceding insurer as a percentage of the premium. The purpose of the reinsurance commission is to reimburse the ceding insurer for the expenses incurred in acquiring the business, including agency commission and expense of management. The ceding insurer invests time and resources in prospecting, issuing policies, and adjusting claims, which benefit the reinsurer indirectly. Therefore, the reinsurer compensates the ceding insurer through the reinsurance commission. Option b accurately describes the purpose of reinsurance commission. Options a, c, and d incorrectly describe the purpose or the recipient of the commission.
Q32.
How are premiums typically accounted for in reinsurance accounting?

a.

Gross premium

b.

Net premium

c.

Gross premium with deductions

d.

Net premium with deductions

Discuss
Answer: (b).Net premium Explanation:In reinsurance accounting, premiums are typically accounted for as net premiums. This means that the premiums are recorded after deducting any original acquisition costs, such as agency commission and other expenses incurred by the ceding insurer. Net premiums reflect the actual amount received by the ceding insurer for the reinsurance coverage.
Q33.
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.
Q34.
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.
Q35.
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.
Q36.
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.
Q37.
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.
Q38.
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.
Q39.
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.
Q40.
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.
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