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 7 of 16

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Q61.
In which country is a Service Tax of 5% levied on direct premium?

a.

India

b.

Germany

c.

Switzerland

d.

United States

Discuss
Answer: (a).India Explanation:In India, a Service Tax of 5% is levied on direct premiums. This tax is applicable to the premiums collected by insurers for the insurance coverage provided to policyholders.
Q62.
Where is a reinsurer liable to income tax on profit based on their worldwide business?

a.

In their country of incorporation

b.

In each country where they operate

c.

In the country where their head office is registered

d.

In the country with the highest tax rate

Discuss
Answer: (a).In their country of incorporation Explanation:A reinsurer is generally liable to income tax on profit based on their worldwide business in the country where their head office or company is incorporated. This is the primary jurisdiction for taxation purposes.
Q63.
How is interest on premium reserve released treated for tax purposes?

a.

Subject to deduction of income tax at source

b.

Exempt from income tax

c.

Waived under reciprocal arrangements

d.

Taxed at a lower rate than other income sources

Discuss
Answer: (a).Subject to deduction of income tax at source Explanation:Interest on premium reserve released is subject to deduction of income tax at source. When the interest is paid or released, the applicable tax amount is deducted before the remaining amount is made available to the reinsurer.
Q64.
How do some insurers reduce administrative work related to reserves and interest?

a.

By retaining reserves and waiving interest

b.

By waiving reserves and retaining interest

c.

By adjusting commissions instead of calculating reserves and interest

d.

By avoiding double taxation through international agreements

Discuss
Answer: (a).By retaining reserves and waiving interest Explanation:Some insurers may choose to retain reserves but waive interest to reduce administrative work. This means they keep the reserves intact but forgo the interest income, simplifying the calculation and management of the interest component while still maintaining the necessary reserves.
Q65.
What is the percentage of service tax that is levied on direct premium in India?

a.

2%

b.

3%

c.

5%

d.

7%

Discuss
Answer: (c).5% Explanation:The percentage of service tax that is levied on direct premium in India is 5%. This tax is imposed on the premiums collected by insurers for providing insurance coverage directly to policyholders.
Q66.
Why is national self-sufficiency in reinsurance not feasible in the long run?

a.

It results in excessive use of foreign exchange

b.

It restricts the growth of the insurance industry

c.

It lacks the necessary expertise and capacity

d.

It increases the cost of reinsurance

Discuss
Answer: (c).It lacks the necessary expertise and capacity Explanation:National self-sufficiency in reinsurance is not feasible in the long run because it lacks the necessary expertise and capacity. Countries rely on reinsurance due to the specialized knowledge and resources required.
Q67.
Which act governs the law and regulation relating to the use of foreign exchange in insurance and reinsurance transactions in India?

a.

Insurance Act, 1938

b.

Foreign Exchange Management Act, 2000

c.

Reinsurance Regulation Act, 1999

d.

Foreign Investment Promotion Act, 2010

Discuss
Answer: (b).Foreign Exchange Management Act, 2000 Explanation:The Foreign Exchange Management Act, 2000 governs the law and regulation related to the use of foreign exchange in insurance and reinsurance transactions in India.
Q68.
According to the Foreign Exchange Management Act, can a person resident in India take any general or life insurance policy issued by an insurer outside India?

a.

Yes, without any restrictions

b.

No, it is strictly prohibited

c.

Yes, with permission from the Reserve Bank

d.

Yes, with permission from the Government of India

Discuss
Answer: (c).Yes, with permission from the Reserve Bank Explanation:According to the Foreign Exchange Management Act, a person resident in India cannot take any general or life insurance policy issued by an insurer outside India unless they have obtained permission from the Reserve Bank of India.
Q69.
Who grants permission to GIC Re, the national reinsurer of India, for arranging remittances of foreign exchange in respect of their reinsurance arrangements?

a.

Government of India

b.

Insurance Regulatory and Development Authority of India (IRDAI)

c.

Reserve Bank of India (RBI)

d.

Foreign Exchange Management Authority (FEMA)

Discuss
Answer: (c).Reserve Bank of India (RBI) Explanation:Permission for arranging remittances of foreign exchange in respect of reinsurance arrangements is granted to GIC Re by the Reserve Bank of India, which acts as an authorized dealer.
Q70.
How do insurers in India obtain permission to remit foreign exchange for their reinsurance transactions?

a.

They submit applications directly to the Reserve Bank of India

b.

They seek approval from the Government of India

c.

They obtain permission from the Insurance Regulatory and Development Authority of India

d.

They submit applications to the respective banks supported by original documentary evidence

Discuss
Answer: (d).They submit applications to the respective banks supported by original documentary evidence Explanation:Insurers in India obtain permission to remit foreign exchange for their reinsurance transactions by submitting applications to the respective banks, supported by original documentary evidence in specified forms.
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