Reinsurance Program Design MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Reinsurance Program Design, 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 Program Design 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 Program Design mcq questions that explore various aspects of Reinsurance Program Design problems. Each MCQ is crafted to challenge your understanding of Reinsurance Program Design 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 Program Design 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 Program Design. 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 Program Design knowledge to the test? Let's get started with our carefully curated MCQs!

Reinsurance Program Design MCQs | Page 1 of 6

Discover more Topics under IC85 Reinsurance Management

Q1.
What is the primary objective of a reinsurance program?

a.

To increase the company’s probability of ruin

b.

To stabilize fluctuation in the insurer’s annual aggregate claims experience

c.

To increase concentration of risks in one class of business or geographical area

d.

To minimize the risk of suffering a greater liability than justified by the financial resources in the event of a catastrophe

Discuss
Answer: (b).To stabilize fluctuation in the insurer’s annual aggregate claims experience Explanation:The primary objective of a reinsurance program is to stabilize any fluctuation in the insurer’s annual aggregate claims experience so that wide fluctuations in results from one year to the next are avoided.
Q2.
What is the role of reinsurance in safeguarding the solvency of an insurer?

a.

It reduces the company's probability of ruin at a price acceptable to the company

b.

It stabilizes fluctuation in the insurer's annual aggregate claims experience

c.

It allows an insurer to accept risks beyond its normal retention

d.

It increases the concentration of risks in any one class of business or geographical area

Discuss
Answer: (a).It reduces the company's probability of ruin at a price acceptable to the company Explanation:The role of reinsurance is to safeguard the solvency of an insurer against random fluctuations in the overall claims experience and an accumulation of losses arising out of one event by reducing the company's probability of ruin at a price acceptable to the company.
Q3.
How can reinsurance be used to allow an insurer to accept risks beyond its normal retention?

a.

By stabilizing the insurer's annual aggregate claims experience

b.

By reducing the concentration of risks in any one class of business or geographical area

c.

By minimizing the risk of suffering a greater liability than justified by the financial resources in the event of a catastrophe

d.

By ceding a portion of the risk to the reinsurer and ensuring that it is not placed at a serious disadvantage compared to its competitors

Discuss
Answer: (d).By ceding a portion of the risk to the reinsurer and ensuring that it is not placed at a serious disadvantage compared to its competitors Explanation:Reinsurance can be used to allow an insurer to accept risks beyond its normal retention and so ensure that it is not placed at a serious disadvantage compared to its competitors by ceding a portion of the risk to the reinsurer.
Q4.
How can reinsurance minimize the risk of suffering a greater liability than justified by the financial resources in the event of a catastrophe?

a.

By stabilizing the insurer's annual aggregate claims experience

b.

By reducing the concentration of risks in any one class of business or geographical area

c.

By minimizing the accumulation of losses arising out of one event

d.

By ensuring a wide spread of risks and reducing the concentration of risks in any one class of business or geographical area

Discuss
Answer: (c).By minimizing the accumulation of losses arising out of one event Explanation:Reinsurance can minimize the risk of suffering a greater liability than justified by the financial resources in the event of a catastrophe by minimizing the accumulation of losses arising out of one event.
Q5.
What is the technical objective of a reinsurance program?

a.

To stabilize the technical results of the insurer / reinsurer by reducing fluctuations in claims to the yearly retained account

b.

To increase the concentration of risks in any one class of business or geographical area

c.

To minimize the risk of suffering a greater liability than justified by the financial resources in the event of a catastrophe

d.

To reduce the probability of ruin at a price acceptable to the company

Discuss
Answer: (a).To stabilize the technical results of the insurer / reinsurer by reducing fluctuations in claims to the yearly retained account Explanation:The technical objective of a reinsurance program is to stabilize the technical results of the insurer / reinsurer by reducing fluctuations in claims to the yearly retained account.
Q6.
What is the objective of a reinsurance program relating to the business efforts of the insurer?

a.

To reduce the concentration of risks in any one class of business or geographical area

b.

To accommodate increasing values due to inflationary trends and improvements in technology

c.

To reward reinsurers with profits over a period of time

d.

To stabilize the insurer's annual aggregate claims experience

Discuss
Answer: (b).To accommodate increasing values due to inflationary trends and improvements in technology Explanation:The objective of a reinsurance program relating to the business efforts of the insurer is to accommodate increasing values due to inflationary trends and improvements in technology, preserve development efforts, and add to the prestige of the insurer/reinsurer.
Q7.
Why is it important to keep the gross account profitable in a reinsurance program?

a.

To reduce the company’s probability of ruin.

b.

To accommodate increasing values due to inflationary trends and improvements in technology.

c.

To reward reinsurers with profits over a period of time.

d.

To govern rating levels in the market by underwriting consideration rather than market forces.

Discuss
Answer: (d).To govern rating levels in the market by underwriting consideration rather than market forces. Explanation:It is important to keep the gross account profitable in a reinsurance program to govern rating levels in the market by underwriting consideration rather than being left to market forces. This helps in rewarding reinsurers with profits over a period of time, whether for the insurer's own inward reciprocal business or for reinsurance as a cover requirement.
Q8.
What is the primary objective of reinsurance?

a.

To reduce the company's probability of ruin

b.

To stabilize any fluctuation in the insurer's annual aggregate claims experience

c.

To allow an insurer to accept risks beyond its normal retention and not be placed at a serious disadvantage compared to its competitors

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The primary objectives of reinsurance are to reduce the company's probability of ruin, stabilize fluctuations in claims experience, and allow the insurer to accept risks beyond its normal retention to compete with its competitors.
Q9.
How can the reinsurance program aid in preserving the business efforts of the insurer?

a.

By accommodating increasing values due to inflationary trends and improvements in technology

b.

By easily accommodating newer types of cover devised for new developments arising from changes in science and technology

c.

Both a and b

d.

None of the above

Discuss
Answer: (c).Both a and b Explanation:The reinsurance program can aid in preserving the business efforts of the insurer by accommodating increasing values due to inflationary trends and improvements in technology and by easily accommodating newer types of cover devised for new developments arising from changes in science and technology.
Q10.
What is the need to keep the gross account profitable in the reinsurance program?

a.

To reward reinsurers with profits over a period of time

b.

To govern rating levels in the market by underwriting consideration rather than leaving it to market forces

c.

Both a and b

d.

None of the above

Discuss
Answer: (c).Both a and b Explanation:The need to keep the gross account profitable in the reinsurance program is to reward reinsurers with profits over a period of time and to govern rating levels in the market by underwriting consideration rather than leaving it to market forces.
Page 1 of 6