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.

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Reinsurance Distributing the Programme Arrangements MCQs | Page 6 of 10

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Q51.
How does the formation of market pools differ from group underwriting?

a.

Each insurer maintains their own net retention

b.

The business is redistributed among the group members

c.

The retention levels are significantly increased

d.

The administrative burden of reinsurance is reduced

Discuss
Answer: (a).Each insurer maintains their own net retention Explanation:Under the formation of market pools, each insurer keeps their own net retention and then cedes to the pool on a priority basis up to defined limits. This implies that individual insurers maintain their own retention levels while participating in the pool. Therefore, option a is the correct answer.
Q52.
What is a key benefit of market pools?

a.

Reduction of reinsurance premiums

b.

Increased profitability for individual insurers

c.

Balancing of different portfolios of risks

d.

Simplification of underwriting procedures

Discuss
Answer: (c).Balancing of different portfolios of risks Explanation:Market pools can be useful when each member is ceding a different portfolio of risks to the pool. In such cases, the pool can create a well-balanced portfolio by pooling and redistributing the risks. Therefore, option c is the correct answer.
Q53.
When can market pools be particularly effective?

a.

When there is a small number of participants

b.

When the retention levels are very high

c.

When each member has similar portfolios of risks

d.

When each member has different portfolios of risks

Discuss
Answer: (d).When each member has different portfolios of risks Explanation:Market pools can be very useful when each member is ceding a different portfolio of risks to the pool. This implies that market pools are particularly effective in situations where the participating insurers have diverse portfolios of risks. Therefore, option d is the correct answer.
Q54.
Why is it beneficial to involve professional reinsurers in reinsurance placements?

a.

They provide 100% premium reciprocity

b.

They offer lower reciprocal terms for treaties

c.

They provide reinsurance capacity and expertise

d.

They reduce the administrative burden for ceding insurers

Discuss
Answer: (c).They provide reinsurance capacity and expertise Explanation:Professional reinsurers play a useful role in providing reinsurance capacity and expertise to ceding insurers. This implies that involving professional reinsurers can bring valuable knowledge and resources to the reinsurance placements. Therefore, option c is the correct answer.
Q55.
What is a disadvantage of involving professional reinsurers in the first surplus treaty?

a.

They require higher reciprocity terms

b.

They may result in unstable results

c.

They increase the administrative burden for ceding insurers

d.

They offer lower commission rates

Discuss
Answer: (a).They require higher reciprocity terms Explanation:Professional reinsurers cannot provide 100% premium or profit reciprocity. Therefore, offering them a share of the first surplus treaty at lower reciprocal terms may appear wasteful. This implies that involving professional reinsurers in the first surplus treaty might require higher reciprocity terms. Therefore, option a is the correct answer.
Q56.
How do professional reinsurers benefit ceding insurers?

a.

They reduce the costs of reinsurance placements

b.

They offer higher commission rates for treaties

c.

They provide expertise and guidance for free

d.

They increase the stability of results for ceding insurers

Discuss
Answer: (c).They provide expertise and guidance for free Explanation:Professional reinsurers provide a service that costs them significantly but is provided free to the ceding insurers. This service includes expertise and guidance. Therefore, option c is the correct answer.
Q57.
Why is it logical to provide professional reinsurers a share in basic treaties?

a.

They offer stable results for ceding insurers

b.

They reduce the costs of the reinsurance program

c.

They provide 100% profit reciprocity

d.

They lower the administrative burden for ceding insurers

Discuss
Answer: (a).They offer stable results for ceding insurers Explanation:Professional reinsurers can participate in stable results and continue to keep their interest in the ceding insurer. This implies that involving professional reinsurers in basic treaties can contribute to achieving stable results for the ceding insurers. Therefore, option a is the correct answer.
Q58.
Which of the following is correct with respect to market pool?

a.

In market pool, each insurer keeps his own net retention and thereafter cedes to the pool on priority basis up to defined limits.

b.

Market pool may be protected by suitable surplus share covers and redistributed back to the members.

c.

In market pool the ceding insurer cannot get further retention on his own risks through the pool.

d.

Market pools can be very useful where each member is ceding similar portfolio of risks to the pool.

Discuss
Answer: (a).In market pool, each insurer keeps his own net retention and thereafter cedes to the pool on priority basis up to defined limits. Explanation:In a market pool, each insurer retains their own net retention and then cedes to the pool based on a priority basis up to defined limits. This means that each insurer contributes a portion of their business to the pool but retains their own net retention. Therefore, option a is the correct answer.
Q59.
What is the role of an intermediary in the reinsurance placement process?

a.

To represent the insurer to the reinsurer/s and handle documentation

b.

To provide intelligence about world markets

c.

To handle tough negotiations and exchange of argumentative messages

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The intermediary plays a dual role in the reinsurance placement process. Initially, they understand and consult with the proposer to represent them to the reinsurer/s. Once the slip is signed and a cover note is formalized, the intermediary takes over the handling of documentation for the reinsurer. Additionally, the intermediary provides a regular flow of intelligence about world markets, keeps an eye on the financial position of reinsurers, and is capable of handling tough negotiations and exchanges of argumentative messages.
Q60.
What is the primary function of an intermediary in reinsurance placement?

a.

To represent the reinsurer to the proposer

b.

To handle documentation for the insurer

c.

To provide intelligence about world markets

d.

To establish connections with insurers in distant parts of the world

Discuss
Answer: (a).To represent the reinsurer to the proposer Explanation:The intermediary understands and consults with the proposer to properly represent them to the reinsurer/s. The intermediary acts as a bridge between the proposer and the reinsurer, ensuring effective communication and representation. Therefore, option a is the correct answer.
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