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 5 of 16

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Q41.
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.
Q42.
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.
Q43.
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.
Q44.
How are premiums calculated in reinsurance agreements?

a.

Based on the ceding insurer's total net premium after ceding to proportional reinsurances

b.

Based on the reinsurer's total net premium after ceding to proportional reinsurances

c.

Based on a fixed percentage of the ceding insurer's total premium income

d.

Based on the reinsurer's estimated total premium income

Discuss
Answer: (a).Based on the ceding insurer's total net premium after ceding to proportional reinsurances Explanation:Premiums in reinsurance agreements are calculated at a rate specified in the contract, which is applied to the ceding insurer's total net premium after ceding to proportional reinsurances.
Q45.
How are premiums calculated in reinsurance agreements?What is the purpose of a deposit premium in reinsurance agreements?

a.

Based on the ceding insurer's total net premium after ceding to proportional reinsurancesTo cover minimum premium requirements

b.

Based on the reinsurer's total net premium after ceding to proportional reinsurancesTo ensure timely payment of premiums

c.

Based on a fixed percentage of the ceding insurer's total premium incomeTo account for estimated total net premium

d.

Based on the reinsurer's estimated total premium incomeTo provide additional coverage for high-risk policies

Discuss
Answer: (a).Based on the ceding insurer's total net premium after ceding to proportional reinsurancesTo cover minimum premium requirements Explanation:Premiums in reinsurance agreements are calculated at a rate specified in the contract, which is applied to the ceding insurer's total net premium after ceding to proportional reinsurances.A deposit premium in reinsurance agreements is paid to cover minimum premium requirements, and it is subject to adjustment when the ceding insurer's final premium income is known.
Q46.
How is the adjustment account in reinsurance calculated?

a.

Based on the estimated premium income

b.

Based on the actual premium income accounted for the portfolio

c.

Based on the premium rate specified in the contract

d.

Based on the deposit premium paid by the ceding insurer

Discuss
Answer: (b).Based on the actual premium income accounted for the portfolio Explanation:The adjustment account in reinsurance is calculated based on the actual premium income accounted for the portfolio for the period concerned, and it is prepared and rendered when the premium amount is known at the end of the accounting year.
Q47.
What is the unit of currency expressed in a treaty agreement?

a.

Reinsurer's domestic currency

b.

Ceding insurer's domestic currency

c.

Reinsurer's original currency

d.

Ceding insurer's original currency

Discuss
Answer: (b).Ceding insurer's domestic currency Explanation:The unit of currency expressed in a treaty agreement is typically the ceding insurer's domestic currency.
Q48.
Under what conditions can a ceding insurer revert to accounting in original currencies?

a.

In the event of major changes in the currency situation

b.

In the event of restrictions on currency transfers

c.

In the event of fluctuations in exchange rates exceeding 10%

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:A ceding insurer can revert to accounting in original currencies if there are major changes in the currency situation, restrictions on currency transfers, or fluctuations in exchange rates exceeding 10%.
Q49.
Who is responsible for paying brokerage in reinsurance placements?

a.

Ceding insurer

b.

Reinsurer

c.

Broker

d.

Both ceding insurer and reinsurer share the brokerage

Discuss
Answer: (b).Reinsurer Explanation:Brokerage in reinsurance placements is payable by the reinsurer, not the ceding insurer.
Q50.
How are statements of accounts and balances typically sent in reinsurance placements?

a.

Directly from reinsurer to ceding insurer

b.

Directly from broker to ceding insurer

c.

Through brokers

d.

Through a separate accounting firm

Discuss
Answer: (c).Through brokers Explanation:In reinsurance placements, statements of accounts and balances are typically sent through brokers.
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