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 5 of 16

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Q41.
When does the ceding insurer prepare a statement to determine whether a treaty shows a profit or a loss?

a.

When the treaty covers multiple currencies

b.

When the treaty covers multiple classes of business

c.

When the treaty includes provision for a profit commission

d.

All of the above

Discuss
Answer: (c).When the treaty includes provision for a profit commission Explanation:The ceding insurer prepares a statement to determine whether a treaty shows a profit or a loss when the treaty includes provision for a profit commission.
Q42.
What is the purpose of aggregating the results of subsections under a treaty?

a.

To determine the overall treaty profit or loss

b.

To determine the profit commission payable

c.

To determine the average profit over three years

d.

To determine the profit commission percentage

Discuss
Answer: (a).To determine the overall treaty profit or loss Explanation:The purpose of aggregating the results of subsections under a treaty is to determine the overall treaty profit or loss for the year.
Q43.
In addition to aggregating results for subsections under a treaty, what other provision is sometimes made?

a.

Combining the results of multiple treaties

b.

Combining the results of multiple classes of business

c.

Combining the results of multiple currencies

d.

Combining the results of multiple years

Discuss
Answer: (a).Combining the results of multiple treaties Explanation:In addition to aggregating results for subsections under a treaty, provision is sometimes made to combine the results of more than one treaty to determine annual profit.
Q44.
What are the different formulas used to determine the basis for calculating the profit commission payable?

a.

Losses carried forward to extinction

b.

Losses carried forward for a limited period

c.

Current year's result with offset for past losses

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The formulas used to determine the basis for calculating the profit commission payable can include losses carried forward to extinction, losses carried forward for a limited period, current year's result with offset for past losses, and a three-year average of aggregate profit.
Q45.
What happens if the final result is a loss?

a.

No profit commission is payable

b.

The profit commission is calculated based on the sliding scale

c.

The profit commission is a flat rate

d.

The profit commission is adjusted based on past losses

Discuss
Answer: (a).No profit commission is payable Explanation:If the final result is a loss, no profit commission is payable.
Q46.
How is the profit commission percentage determined when the final result is a profit?

a.

It is a flat rate percentage

b.

It is calculated based on a sliding scale

c.

It is based on the average profit over three years

d.

It is adjusted based on the premiums of the year

Discuss
Answer: (b).It is calculated based on a sliding scale Explanation:When the final result is a profit, the profit commission percentage is applied. It can be calculated based on a sliding scale, such as 25% on profit equal to 10% of the premiums of the year, 35% on profit equal to the next 10% of the premiums of the year, and 50% on the remaining profit.
Q47.
What happens to the result of the previous year's statement if it is a loss?

a.

It is ignored

b.

It is deducted from the profit of the current year's statement

c.

It is added to the loss of the current year's statement

d.

It is carried forward for a limited period

Discuss
Answer: (c).It is added to the loss of the current year's statement Explanation:If the result of the previous year's statement is a loss, it must be carried forward and added to the loss of the current year's statement.
Q48.
In which scenario is no profit commission paid in the current year?

a.

When the final result is an overall profit

b.

When the final result is an overall loss

c.

When the previous year's result is a loss

d.

When the previous year's result is a profit

Discuss
Answer: (b).When the final result is an overall loss Explanation:No profit commission is paid in the current year unless the final result is an overall profit.
Q49.
What is the recommended practice for maintaining a breakdown of results for a loss carried forward for a limited period?

a.

Including the loss carried forward from the previous year in the body of the profit commission statement

b.

Keeping each year's results separate

c.

Ignoring the loss carried forward and focusing only on the current year's result

d.

Combining the loss carried forward with the profit commission payable

Discuss
Answer: (b).Keeping each year's results separate Explanation:
Q50.
How are the results calculated for treaties on a three-year average basis?

a.

The current year's profit is multiplied by 1/3

b.

The current year's profit is multiplied by 1/2

c.

The current year's profit is added to the previous two years' profits

d.

The current year's profit is ignored

Discuss
Answer: (c).The current year's profit is added to the previous two years' profits Explanation:The results for treaties on a three-year average basis are calculated by adding the current year's profit to the profits of the previous two years.
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