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.

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Reinsurance Program Design MCQs | Page 3 of 6

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Q21.
What is a good index for measuring the effect of the program on retentions?

a.

The anticipated incurred loss ratio to the gross and net accounts in a class

b.

The commission component of the reinsurance ceded

c.

The additional cost of the excess of loss reinsurance cover

d.

The gross experience of a class concerned

Discuss
Answer: (a).The anticipated incurred loss ratio to the gross and net accounts in a class Explanation:The anticipated incurred loss ratio to the gross and net accounts in a class are very good indices for measuring the effect of the program on retentions.
Q22.
What is the critical component in determining a large proportion of the balance being generated?

a.

The gross experience of a class concerned

b.

The anticipated incurred loss ratio to the gross and net accounts in a class

c.

The commission component of the reinsurance ceded

d.

The cost of reinsurance cover

Discuss
Answer: (c).The commission component of the reinsurance ceded Explanation:The commission component of the reinsurance ceded is critical in determining a large proportion of the balance being generated.
Q23.
What factors determine the insurer's capacity to pursue a policy actively?

a.

The insurer's standing and capacity to generate a good gross direct account

b.

The insurer's capacity to generate a good net retained account and cede to reinsurers

c.

The insurer's financial reserves and experience over a period of time

d.

The insurer's compliance with regulatory policies and guidelines

Discuss
Answer: (a).The insurer's standing and capacity to generate a good gross direct account Explanation:To what extent the policy can be actively pursued depends on the standing of the insurer / reinsurer, his capacity to generate a good gross direct account, and to cede to reinsurers a balanced portfolio with a good premium – liability ratio which produces a healthy experience over a period of time.
Q24.
How does a catastrophe affect the net retained account?

a.

It protects the net account in layers devised to suit the insurer's convenience.

b.

It has no effect on the net account as the excess of loss arrangements protect it.

c.

It can mean a substantial drain on the resources of the insurer / reinsurer.

d.

It leads to a higher loss ratio in the gross direct account.

Discuss
Answer: (c).It can mean a substantial drain on the resources of the insurer / reinsurer. Explanation:The effect of catastrophe on the net retained account needs to be evaluated, as a single catastrophe can mean a substantial drain on the resources of the insurer / reinsurer.
Q25.
What is the relevance of paid-up capital & free reserves in reinsurance program design?

a.

It helps in deciding the geographical location of operations

b.

It helps in analyzing exposure to various perils

c.

It influences retentions, cover limits, and reinsurance costs

d.

It helps in ensuring acceptability of the program to reinsurers

Discuss
Answer: (c).It influences retentions, cover limits, and reinsurance costs Explanation:Paid-up capital and free reserves, which indicate the financial strength of the insurer, play a crucial role in influencing retentions, cover limits, and reinsurance costs.
Q26.
Why is risk-based capital important in reinsurance program design?

a.

To decide on the geographical location of operations

b.

To analyze exposure to various perils

c.

To ensure acceptability of the program to reinsurers

d.

To judge financial effects on the insurer’s capital base

Discuss
Answer: (d).To judge financial effects on the insurer’s capital base Explanation:Risk-based capital is important in reinsurance program design as it helps in judging the financial effects of the largest risk and cat exposures accepted by the insurer on a gross and net basis on its capital base.
Q27.
What is the relevance of the size and structure of the portfolio in reinsurance program design?

a.

It helps in analyzing exposure to various perils

b.

It influences retentions, cover limits, and reinsurance costs

c.

It helps in ensuring acceptability of the program to reinsurers

d.

It helps in decision making on what type of reinsurance arrangements are most suitable

Discuss
Answer: (d).It helps in decision making on what type of reinsurance arrangements are most suitable Explanation:The size and structure of the portfolio are important factors in reinsurance program design as they help in deciding on what type of reinsurance arrangements are most suitable.
Q28.
Why is the frequency and size of losses important in reinsurance program design?

a.

To decide on the geographical location of operations

b.

To analyze exposure to various perils

c.

To influence retentions, cover limits, and reinsurance costs

d.

To help in decision making on the type of reinsurance arrangements

Discuss
Answer: (d).To help in decision making on the type of reinsurance arrangements Explanation:The frequency and size of losses are important in reinsurance program design as they help in decision making on the type of reinsurance arrangements, such as retentions and excess of loss covers.
Q29.
What is the relevance of management, underwriting, and claims handling capabilities in reinsurance program design?

a.

It helps in analyzing exposure to various perils

b.

It influences retentions, cover limits, and reinsurance costs

c.

It helps in ensuring acceptability of the program to reinsurers

d.

It reflects management philosophy on program objectives and confidence in underwriting and claims handling teams

Discuss
Answer: (d).It reflects management philosophy on program objectives and confidence in underwriting and claims handling teams Explanation:Management, underwriting, and claims handling capabilities are important in reinsurance program design as they reflect management philosophy on program objectives and its confidence in underwriting and claims handling teams.
Q30.
Why is investment and liquidity policy important in reinsurance program design?

a.

To ensure acceptability of the program to reinsurers

b.

To help in analyzing exposure to various perils

c.

To ascertain cash flow produced by the business

d.

To decide on the type of reinsurance arrangements

Discuss
Answer: (c).To ascertain cash flow produced by the business Explanation:Investment and liquidity policy is important in reinsurance program design as it helps in ascertaining the cash flow produced by the business.
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