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 8 of 16

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Q71.
What is the approximate percentage of the premium ceded to the treaty that works out as portfolio withdrawal?

a.

20%

b.

30%

c.

40%

d.

50%

Discuss
Answer: (c).40% Explanation:The portfolio withdrawal works out to approximately 40% of the premium ceded to the treaty.
Q72.
How does the calculation for unexpired risks in financial accounting differ from the portfolio withdrawal calculation?

a.

Commissions are deducted in the portfolio withdrawal calculation only

b.

The fixed percentage calculation is used in financial accounting

c.

The unexpired exposure is not considered in financial accounting

d.

Long or short term cessions are accounted for differently in financial accounting

Discuss
Answer: (a).Commissions are deducted in the portfolio withdrawal calculation only Explanation:The calculation for unexpired risks in financial accounting is similar to the portfolio withdrawal calculation, except that in the portfolio withdrawal calculation, commissions are also deducted.
Q73.
What is the purpose of the clean-cut method in reinsurance?

a.

To calculate the unexpired premium for the new treaty year

b.

To withdraw liability for unexpired risks and outstanding losses from outgoing reinsurers

c.

To adjust the portfolio premium based on settlement differences

d.

To release premium reserves simultaneously with portfolio withdrawal

Discuss
Answer: (b).To withdraw liability for unexpired risks and outstanding losses from outgoing reinsurers Explanation:The clean-cut method is used to withdraw liability for unexpired risks and outstanding losses from outgoing reinsurers.
Q74.
What is portfolio loss withdrawal?

a.

Withholding premium reserves from outgoing reinsurers

b.

Calculating the proportion of estimated outstanding losses for outgoing reinsurers

c.

Crediting incoming reinsurers with their proportion of estimated outstanding losses

d.

Adjusting settlement differences between losses finally settled and portfolio loss amount

Discuss
Answer: (b).Calculating the proportion of estimated outstanding losses for outgoing reinsurers Explanation:Portfolio loss withdrawal involves calculating the proportion of estimated outstanding losses for outgoing reinsurers.
Q75.
What is portfolio loss entry?

a.

Releasing premium reserves to incoming reinsurers

b.

Adjusting settlement differences in the treaty contract

c.

Debiting outgoing reinsurers with their proportion of estimated outstanding losses

d.

Crediting incoming reinsurers with their proportion of estimated outstanding losses

Discuss
Answer: (d).Crediting incoming reinsurers with their proportion of estimated outstanding losses Explanation:Portfolio loss entry refers to crediting incoming reinsurers with their proportion of estimated outstanding losses.
Q76.
When is the clean-cut method typically followed?

a.

In property proportional treaties

b.

In treaty contracts with settlement differences

c.

In reinsurance contracts with material differences in losses settled

d.

In treaties with withheld premium reserves

Discuss
Answer: (a).In property proportional treaties Explanation:The clean-cut method is usually followed in most property proportional treaties.
Q77.
What happens to premium reserves in the clean-cut method?

a.

They are withheld from outgoing reinsurers.

b.

They are adjusted based on settlement differences.

c.

They are released simultaneously with portfolio withdrawal.

d.

They are reserved for the next year's premium.

Discuss
Answer: (c).They are released simultaneously with portfolio withdrawal. Explanation:In the clean-cut method, premium reserves are released simultaneously with portfolio withdrawal, and the reserve corresponding to the premium of the previous year is withheld in the first account of the next year.
Q78.
What is the range of interest that ceding insurers allow reinsurers in treaties with provision for retention of reserves?

a.

1% to 2%

b.

2% to 4%

c.

4% to 6%

d.

6% to 8%

Discuss
Answer: (b).2% to 4% Explanation:Ceding insurers allow reinsurers interest ranging between 2% and 4% or slightly higher in treaties with provision for retention of reserves.
Q79.
When is the interest credited to reinsurers in treaties with provision for retention of reserves?

a.

In the quarter when the reserve is released

b.

In the quarter when the reserve is retained

c.

At the end of the treaty year

d.

At the beginning of the treaty year

Discuss
Answer: (a).In the quarter when the reserve is released Explanation:The interest is credited to reinsurers in the quarter when the reserve is released.
Q80.
How is the net return to the reinsurer affected by tax regulations?

a.

It increases the net return

b.

It decreases the net return

c.

It has no effect on the net return

d.

It depends on the specific tax regulations

Discuss
Answer: (b).It decreases the net return Explanation:The net return to the reinsurer is decreased as the interest is subject to tax as per local regulations.
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