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 9 of 16

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Q81.
Which type of reinsurance accounts are normally rendered on an "Accounts Year" basis?

a.

Fire and Accident Proportional Reinsurance

b.

Marine Proportional Reinsurance

c.

Non-Proportional Reinsurance

d.

Catastrophe Excess Reinsurance

Discuss
Answer: (a).Fire and Accident Proportional Reinsurance Explanation:The accounts for fire and accident proportional reinsurance are typically rendered on an "Accounts Year" basis. In these accounts, the premiums are usually shown at original gross rates, and the reinsurance commission rate is then applied.
Q82.
What is overriding commission in reinsurance?

a.

Commission paid by the ceding insurer to the reinsurer

b.

Commission paid by the reinsurer to the ceding insurer

c.

Additional commission paid by the reinsurer to the ceding insurer for inward retrocession

d.

Commission paid by the reinsurer to the retrocessionaire

Discuss
Answer: (c).Additional commission paid by the reinsurer to the ceding insurer for inward retrocession Explanation:When a reinsurer receives business as an inward retrocession, the reinsurer will allow the ceding insurer overriding commission over and above any share of the original commission that he may pay.
Q83.
How is the percentage of brokerage payable in reinsurance determined?

a.

It is fixed by the reinsurer.

b.

It is fixed by the ceding insurer.

c.

It is negotiated between the reinsurer and the ceding insurer.

d.

It is stipulated in the treaty agreement.

Discuss
Answer: (d).It is stipulated in the treaty agreement. Explanation:The percentage of brokerage payable is applied to premiums written on gross, net, or partial net basis, and this must be clearly stipulated in the treaty agreement.
Q84.
What is profit commission in reinsurance?

a.

Commission paid by the ceding insurer to the reinsurer on profitable treaties

b.

Commission paid by the reinsurer to the ceding insurer on profitable treaties

c.

Additional percentage payable to the reinsurer on profitable treaties

d.

Additional percentage payable to the ceding insurer on profitable treaties

Discuss
Answer: (b).Commission paid by the reinsurer to the ceding insurer on profitable treaties Explanation:Profit commission is an additional percentage payable to a ceding insurer on profitable treaties in accordance with an agreed formula. It is therefore an incentive for ceding insurers to produce profitable business.
Q85.
Which country levies a Service Tax of 5% on direct premium?

a.

United States

b.

Switzerland

c.

India

d.

Germany

Discuss
Answer: (c).India Explanation:In India, a Service Tax of 5% on direct premium is levied.
Q86.
What law and regulation govern the use of foreign exchange in respect of insurance and reinsurance transactions overseas in India?

a.

Insurance Act 1938

b.

Companies Act 1956

c.

Foreign Exchange Management Act, 2000

d.

Income Tax Act 1961

Discuss
Answer: (c).Foreign Exchange Management Act, 2000 Explanation:In India, the use of foreign exchange in respect of insurance and reinsurance transactions overseas is governed by the Foreign Exchange Management Act, 2000.
Q87.
Who reviews and approves the reinsurance arrangements of the GIC Re?

a.

Reserve Bank of India

b.

Government of India

c.

Insurance Regulatory and Development Authority of India

d.

Securities and Exchange Board of India

Discuss
Answer: (b).Government of India Explanation:The reinsurance arrangements of the GIC Re are reviewed annually and approved by the Government of India.
Q88.
Which regulatory authority grants permission to GIC Re as an authorized dealer to arrange remittances of foreign exchange for reinsurance arrangements?

a.

Reserve Bank of India

b.

Insurance Regulatory and Development Authority of India

c.

Securities and Exchange Board of India

d.

Foreign Exchange Management Authority of India

Discuss
Answer: (a).Reserve Bank of India Explanation:Permission is granted by the Reserve Bank of India to GIC Re as an authorized dealer to arrange remittances of foreign exchange in respect of their reinsurance arrangements. This indicates that the Reserve Bank of India is the regulatory authority responsible for granting such permission in the context of reinsurance arrangements involving GIC Re.
Q89.
Which of the following reinsurance commission method is used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year?

a.

Flat rate of commission

b.

Sliding Scale of commission

c.

Overriding commission

d.

Profit commission

Discuss
Answer: (b).Sliding Scale of commission Explanation:The sliding scale of commission is a reinsurance commission method used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year. This means that the commission rate varies or slides based on the performance of the treaty, specifically its loss ratio. As the loss ratio increases or decreases, the commission rate is adjusted accordingly.
Q90.
Which of the following reinsurance commission method is used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year?____________ is an additional percentage payable to a ceding insurer on profitable treaties in accordance with an agreed formula.

a.

Flat rate of commissionOverriding commission

b.

Sliding Scale of commissionBrokerage

c.

Overriding commissionProfit commission

d.

Profit commissionFlat rate commission

Discuss
Answer: (b).Sliding Scale of commissionProfit commission Explanation:The sliding scale of commission is a reinsurance commission method used to calculate the rate of commission based on the loss ratio of the treaty during any one treaty year or during any one underwriting year. This means that the commission rate varies or slides based on the performance of the treaty, specifically its loss ratio. As the loss ratio increases or decreases, the commission rate is adjusted accordingly.Profit commission is an additional percentage payable to a ceding insurer on profitable treaties in accordance with an agreed formula. Profit commission serves as an incentive for ceding insurers to produce profitable business. When the treaty results in a profit, the ceding insurer receives an additional commission based on a predetermined formula or agreement. This encourages the ceding insurer to actively pursue and maintain profitable reinsurance treaties.
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