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.

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Reinsurance Accounting MCQs | Page 4 of 16

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Q31.
How can the overriding commission payable by the reinsurer be calculated?

a.

On gross premium

b.

On net premium

c.

On partial net premiums

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The overriding commission payable by the reinsurer can be calculated on gross premium, net premium, or partial net premiums as stipulated in the treaty agreement.
Q32.
How is the percentage of brokerage payable determined?

a.

It is a fixed percentage applied to premiums written on a gross basis

b.

It is a fixed percentage applied to premiums written on a net basis

c.

It is a fixed percentage applied to premiums written on a partial net basis

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The percentage of brokerage payable can be applied to premiums written on a gross basis, net basis, or partial net basis, as specified in the treaty agreement.
Q33.
What is profit commission in reinsurance?

a.

Additional premium charged on profitable treaties

b.

Additional percentage payable to the ceding insurer on profitable treaties

c.

Additional commission paid by the ceding insurer to the reinsurer on profitable treaties

d.

Additional payment made by the reinsurer to the ceding insurer on profitable treaties

Discuss
Answer: (b).Additional percentage payable to the ceding insurer on profitable treaties Explanation:Profit commission is an additional percentage payable to the ceding insurer on profitable treaties as an incentive for producing profitable business.
Q34.
What are the two types of profit commission statements?

a.

Accounting Year basis and Underwriting Year basis

b.

Gross Premium basis and Net Premium basis

c.

Retrocession basis and Proportional basis

d.

Marine basis and Aviation basis

Discuss
Answer: (a).Accounting Year basis and Underwriting Year basis Explanation:The two types of profit commission statements are Accounting Year basis and Underwriting Year basis, with Fire and Accident proportional treaties usually on an Accounting Year basis and Marine and Aviation proportional treaties on an Underwriting Year basis.
Q35.
Is profit commission common in non-proportional treaties?

a.

Yes, it is common in non-proportional treaties.

b.

No, it is rare for non-proportional treaties to have a profit commission clause.

c.

May be Yes or No

d.

Can't say

Discuss
Answer: (b).No, it is rare for non-proportional treaties to have a profit commission clause. Explanation:It is rare for a non-proportional treaty of any class to have a profit commission clause, although if provided, it would usually be on an Underwriting Year basis.
Q36.
What is the difference between a profit commission on an "Accounting Year" basis and an "Underwriting Year" basis?

a.

The accounting year basis includes all transactions for the same treaty period, while the underwriting year basis includes transactions of a specific underwriting year.

b.

The accounting year basis considers cash reserves, while the underwriting year basis considers statistical reserves.

c.

The accounting year basis requires adjustments in subsequent years, while the underwriting year basis requires readjustment statements until liability expires.

d.

The accounting year basis involves deferred preparation of the first statement, while the underwriting year basis involves closing accounts after a specified period.

Discuss
Answer: (a).The accounting year basis includes all transactions for the same treaty period, while the underwriting year basis includes transactions of a specific underwriting year. Explanation:A profit commission on an "Accounting Year" basis includes all transactions for the same treaty period, without reference to underwriting year. On the other hand, a profit commission on an "Underwriting Year" basis considers transactions of a specific underwriting year.
Q37.
What reserves are mentioned in the profit commission statement on an "Accounting Year" basis?

a.

Cash reserves retained by the ceding insurer

b.

Premium reserves brought forward and carried forward

c.

Loss reserves brought forward and carried forward

d.

Reinsurer's expenses allowance

Discuss
Answer: (b).Premium reserves brought forward and carried forward Explanation:The profit commission statement on an "Accounting Year" basis includes premium reserves brought forward and carried forward, as well as loss reserves brought forward and carried forward.
Q38.
When are readjustment statements rendered in a profit commission on an "Underwriting Year" basis?

a.

After the end of the accounting year

b.

At least one year after the end of the underwriting year

c.

When all liability has expired

d.

When the profit commission is determined

Discuss
Answer: (b).At least one year after the end of the underwriting year Explanation:In a profit commission on an "Underwriting Year" basis, readjustment statements are rendered at least one year after the end of the underwriting year.
Q39.
What can be done with the outstanding liability of an "Underwriting Year" in profit commission calculations?

a.

It can be transferred to the next open "Underwriting Year."

b.

It can be transferred to the accounting year.

c.

It can be closed and excluded from the profit commission calculation.

d.

It can be carried forward to the subsequent year's profit commission.

Discuss
Answer: (a).It can be transferred to the next open "Underwriting Year." Explanation:In profit commission calculations on an "Underwriting Year" basis, outstanding liability of an "Underwriting Year" can be transferred to the next open "Underwriting Year."
Q40.
What reserves are not included in the profit commission statement on an "Underwriting Year" basis?

a.

Premium reserves brought forward

b.

Premium reserves carried forward

c.

Loss reserves brought forward

d.

Both a and c

Discuss
Answer: (d).Both a and c Explanation:The profit commission statement on an "Underwriting Year" basis does not include premium reserves brought forward or loss reserves brought forward.
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