Reinsurance Distributing the Programme Arrangements MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Reinsurance Distributing the Programme Arrangements, 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 Distributing the Programme Arrangements 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 Distributing the Programme Arrangements mcq questions that explore various aspects of Reinsurance Distributing the Programme Arrangements problems. Each MCQ is crafted to challenge your understanding of Reinsurance Distributing the Programme Arrangements 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 Distributing the Programme Arrangements 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 Distributing the Programme Arrangements. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Reinsurance Distributing the Programme Arrangements knowledge to the test? Let's get started with our carefully curated MCQs!

Reinsurance Distributing the Programme Arrangements MCQs | Page 2 of 10

Discover more Topics under IC85 Reinsurance Management

Q11.
What is the reason behind progressively reducing commission terms for cessions at higher level surpluses?

a.

To incentivize ceding insurers to maintain balanced treaties

b.

To allow reinsurers to build up funds to cover adverse years

c.

To discourage ceding insurers from seeking higher level surpluses

d.

None of the above

Discuss
Answer: (b).To allow reinsurers to build up funds to cover adverse years Explanation:The logic behind progressively reducing commission terms is to allow reinsurers to build up funds to pay for adverse years caused by treaty imbalances.
Q12.
What is the reason behind progressively reducing commission terms for cessions at higher level surpluses?Why do reinsurers prefer securing a waiver of reserves in treaties?

a.

To incentivize ceding insurers to maintain balanced treatiesReserves carry a low rate of interest

b.

To allow reinsurers to build up funds to cover adverse yearsReserves create a financial burden for reinsurers

c.

To discourage ceding insurers from seeking higher level surplusesReserves reduce profitability for reinsurers

d.

None of the aboveAll of the above

Discuss
Answer: (b).To allow reinsurers to build up funds to cover adverse yearsAll of the above Explanation:The logic behind progressively reducing commission terms is to allow reinsurers to build up funds to pay for adverse years caused by treaty imbalances.Reserves, including premium reserves and loss reserves, act as a financial drag on reinsurers. Therefore, securing a waiver of reserves is preferred.
Q13.
What is the benchmark for assessing a country's financial ability to honor transactions?

a.

Sovereign rating of credit agencies

b.

Exchange rate fluctuation

c.

Tax system for reinsurance transactions

d.

Regulatory requirements

Discuss
Answer: (a).Sovereign rating of credit agencies Explanation:The benchmark for assessing a country's ability to honor financial transactions is the "sovereign rating" given by credit agencies.
Q14.
What does a Standard & Poor rating of BBB indicate for a country and its businesses?

a.

Investment grade

b.

Credit watch

c.

Below investment grade

d.

None of the above

Discuss
Answer: (a).Investment grade Explanation:A Standard & Poor rating of BBB would rate a country and all its businesses as investment grade.
Q15.
Why is exchange rate fluctuation considered a major consideration in reinsurance transactions?

a.

It affects the profitability of reinsurance treaties

b.

It impacts the financial transactions between parties in different countries

c.

It influences the tax system for reinsurance transactions

d.

None of the above

Discuss
Answer: (b).It impacts the financial transactions between parties in different countries Explanation:Exchange rate fluctuation is a major consideration in reinsurance transactions because it affects the financial transactions between parties in different countries.
Q16.
What should be considered when assessing the tax system for reinsurance transactions in various countries?

a.

Market experience of the country

b.

Regulatory requirements of the country

c.

both a and b

d.

None of the above

Discuss
Answer: (c).both a and b Explanation:When considering the tax system for reinsurance transactions, it is important to consider both the market experience of the country and other regulatory requirements.
Q17.
What is the primary purpose of a surplus treaty in reinsurance?

a.

To provide protection for small accounts

b.

To retrocede reinsurance accounts

c.

To form the core of most reinsurance programs

d.

To secure a profit advantage for direct insurers

Discuss
Answer: (c).To form the core of most reinsurance programs Explanation:Surplus treaties form the core of most reinsurance programs.
Q18.
When is a quota share treaty typically used?

a.

For retrocession of reinsurance accounts

b.

For large accounts with a surplus

c.

For small accounts with excessive administrative burden

d.

For balancing the net retained portfolio of insurers

Discuss
Answer: (c).For small accounts with excessive administrative burden Explanation:A quota share treaty is used mainly for small accounts where the extra administrative burden of a surplus would be too great.
Q19.
What is the characteristic of a variable quota share treaty?

a.

It combines quota-share and excess-of-loss features

b.

It has a fixed percentage of reinsurance coverage

c.

It provides retrocession of reinsurance accounts

d.

Its reinsured amount varies between a minimum and maximum quota share

Discuss
Answer: (d).Its reinsured amount varies between a minimum and maximum quota share Explanation:Variable quota share treaty can be defined as a treaty where the amount reinsured is expressed as being between a minimum and maximum quota share.
Q20.
What is the purpose of placing business facultatively in reinsurance?

a.

To secure a profit advantage for direct insurers

b.

To produce a balanced book of business for direct insurers

c.

To provide coverage for peak risks business

d.

To operate on a non-proportional basis

Discuss
Answer: (b).To produce a balanced book of business for direct insurers Explanation:Placing business facultatively enables direct insurers to produce a more balanced book of business for themselves and for their treaty reinsurers.
Page 2 of 10