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 6 of 16

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Q51.
When is a final profit commission statement rendered for a cancelled treaty?

a.

In the year it is cancelled

b.

When all liability has expired

c.

When the profit commission percentage is determined

d.

When the claims have been paid

Discuss
Answer: (b).When all liability has expired Explanation:A final profit commission statement is rendered for a cancelled treaty when all liability has expired, which means when all the premiums have been received and all the claims paid.
Q52.
What constitutes the result of the third year in the calculation for a three-year average when a treaty is cancelled?

a.

The result of the cancellation year

b.

The result of the run-off period

c.

The average of the results from the cancellation year and the run-off period

d.

The average of the results from the cancellation year and the two previous years

Discuss
Answer: (d).The average of the results from the cancellation year and the two previous years Explanation:The result of the cancellation year, along with the results of the two previous years, constitutes the result of the third year in the calculation for a three-year average when a treaty is cancelled.
Q53.
What is the purpose of retaining a proportion of the ceded premium by the ceding insurer?

a.

To increase the reinsurer's obligations

b.

To represent the unearned portion of premium ceded

c.

To reduce the reinsurance coverage

d.

To fulfill legal requirements in some countries

Discuss
Answer: (b).To represent the unearned portion of premium ceded Explanation:Retaining a proportion of the ceded premium by the ceding insurer is usually considered as representing the unearned portion of premium ceded.
Q54.
What factors are typically agreed upon in relation to reserves in proportional treaties?

a.

Percentage of premium to be retained, timing of retention and release, interest payable, and treatment upon termination

b.

Percentage of claims settled, timing of claim settlements, interest payable, and treatment upon termination

c.

Percentage of premium to be retained, timing of claim settlements, interest payable, and treatment upon termination

d.

Percentage of premium to be retained, timing of retention and release, treatment of outstanding losses, and interest payable

Discuss
Answer: (a).Percentage of premium to be retained, timing of retention and release, interest payable, and treatment upon termination Explanation:Factors typically agreed upon in relation to reserves in proportional treaties include the percentage of premium to be retained, timing of retention and release, interest payable on reserves, and how reserves are treated upon termination.
Q55.
What is the purpose of adjusting the loss reserve at anniversary dates or in quarterly accounts?

a.

To increase the ceding insurer's liabilities

b.

To establish a fixed rate for outstanding losses

c.

To fulfill legal requirements regarding retention of loss reserves

d.

To reflect changes in estimated outstanding losses over time

Discuss
Answer: (d).To reflect changes in estimated outstanding losses over time Explanation:Adjusting the loss reserve at anniversary dates or in quarterly accounts allows for reflecting changes in estimated outstanding losses over time.
Q56.
How are settled claims typically handled in relation to the loss reserve?

a.

Claims are debited in accounts and the reserve is released immediately

b.

Claims are settled using the loss reserve, which is replenished afterward

c.

Claims are settled using the reinsurer's proportion of loss settlements, not the loss reserve

d.

Claims are settled using the outstanding premium, not the loss reserve

Discuss
Answer: (b).Claims are settled using the loss reserve, which is replenished afterward Explanation:Generally, settled claims are debited in accounts, and the loss reserve is held intact until it is reconstituted in accordance with the treaty terms.
Q57.
What is the purpose of establishing a loss reserve at a fixed rate of 100 or 90% of the outstanding losses?

a.

To ensure full coverage of all outstanding losses

b.

To provide a safeguard to the reinsurer in the event of the ceding insurer's insolvency

c.

To determine the timing of loss reserve adjustments

d.

To comply with legal requirements regarding loss reserves

Discuss
Answer: (b).To provide a safeguard to the reinsurer in the event of the ceding insurer's insolvency Explanation:The purpose of establishing a loss reserve at a fixed rate of 100 or 90% of the outstanding losses is to provide a safeguard to the ceding insurer in the event of the reinsurer's insolvency.
Q58.
What does the ceding insurer do in relation to the reinsurer assuming liability for risks current at the commencement of the reinsurance agreement?

a.

Credit the reinsurer with a percentage of the premiums without deduction of commission

b.

Deduct a percentage of the premiums as commission before crediting the reinsurer

c.

Pay the reinsurer a fixed amount for assuming liability

d.

Waive the requirement for the reinsurer to assume liability for risks

Discuss
Answer: (a).Credit the reinsurer with a percentage of the premiums without deduction of commission Explanation:The ceding insurer credits the reinsurer with an amount equal to a percentage agreed upon of the premiums, without deduction of commission, as accounted in the four quarterly statements immediately preceding the commencement date of reinsurance.
Q59.
How are the reinsurer's liabilities for outstanding losses determined in relation to the commencement date of reinsurance?

a.

The reinsurer assumes liability for 100% of the estimated outstanding losses

b.

The reinsurer assumes liability for 90% of the estimated outstanding losses

c.

The reinsurer assumes liability for 50% of the estimated outstanding losses

d.

The reinsurer assumes liability for the actual payments made for outstanding losses

Discuss
Answer: (b).The reinsurer assumes liability for 90% of the estimated outstanding losses Explanation:The reinsurer assumes liability for his proportion of 90% of the estimated losses outstanding as at the date of commencement.
Q60.
What happens if the actual payments for outstanding losses differ from the amount credited to the reinsurer at the commencement of reinsurance?

a.

The reinsurer must cover the difference in payments

b.

The reinsurer is not liable for any further payments

c.

The ceding insurer can adjust the amount credited to the reinsurer

d.

The ceding insurer is responsible for the difference in payments

Discuss
Answer: (c).The ceding insurer can adjust the amount credited to the reinsurer Explanation:If the actual payments in respect of outstanding losses differ materially from the amount credited to the reinsurer at commencement, the ceding insurer has the right to effect appropriate adjustment.
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