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.
How should reinsurance cessations be evaluated for outward arrangements?

a.

By evaluating the risks on the basis of their loss ratios

b.

By grouping the risks into their types

c.

By assessing the commissions obtained under each arrangement

d.

By studying the additional infrastructure involved in its administration

Discuss
Answer: (a).By evaluating the risks on the basis of their loss ratios Explanation:Reinsurance cessations for outward arrangements should be evaluated by assessing the composition of risks ceded to each arrangement on the basis of their loss ratios.
Q22.
What is needed for a ceding arrangement for reciprocal business?

a.

A mix of risks producing a broad based premium and giving a good treaty balance, yielding fairly sustained positive results over a period of time

b.

A mix of risks producing a narrow based premium and giving a poor treaty balance, yielding fairly sustained negative results over a period of time

c.

A mix of risks producing a broad based premium and giving a poor treaty balance, yielding fairly sustained positive results over a period of time

d.

A mix of risks producing a narrow based premium and giving a good treaty balance, yielding fairly sustained positive results over a period of time

Discuss
Answer: (a).A mix of risks producing a broad based premium and giving a good treaty balance, yielding fairly sustained positive results over a period of time Explanation:For a ceding arrangement for reciprocal business, a mix of risks producing a broad based premium and giving a good treaty balance, yielding fairly sustained positive results over a period of time is needed.
Q23.
What is the purpose of reinsurance?

a.

To generate reciprocal business

b.

To spread risks among insurers

c.

To reduce the cost of reinsuring

d.

To ensure adequate cover for the gross account

Discuss
Answer: (b).To spread risks among insurers Explanation:The purpose of reinsurance is to spread risks among the community of insurers who can support each other in bad times.
Q24.
Why is it necessary to review the working of reinsurance arrangements each year?

a.

To ensure adequate cover for the gross account

b.

To generate an increasingly good inward reciprocity

c.

To reduce the cost of reinsuring

d.

To spread risks among the community of insurers

Discuss
Answer: (b).To generate an increasingly good inward reciprocity Explanation:It is necessary to review the working of reinsurance arrangements each year to generate an increasingly good inward reciprocity with each passing year.
Q25.
What is the basis for determining the economics of each reinsurance arrangement?

a.

The composition of risks ceded to each arrangement based on their loss-ratios

b.

The number of ceding arrangements

c.

The size of the insurance company

d.

The frequency of losses

Discuss
Answer: (a).The composition of risks ceded to each arrangement based on their loss-ratios Explanation:The basis for determining the economics of each reinsurance arrangement is the composition of risks ceded to each arrangement evaluated on the basis of their loss-ratios.
Q26.
In ________________ business, a mix of risks producing a broad based premium and giving a good treaty balance, yielding fairly sustained positive results over a period of time is needed.

a.

Reciprocal business

b.

Risk booked business

c.

Non risk booked business

d.

Medium size business

Discuss
Answer: (a).Reciprocal business Explanation:In reciprocal business, a mix of risks producing a broad-based premium and giving a good treaty balance, yielding fairly sustained positive results over a period of time is needed.
Q27.
In order to eliminate the strain arising from immediate gross payments in respect of risks which are retained marginally, what is administered in all outward arrangements?

a.

Cash loss recovery facility

b.

Investment scheme

c.

Credit facility

d.

Payment deferral facility

Discuss
Answer: (a).Cash loss recovery facility Explanation:A cash loss recovery facility is administered in all outward arrangements to eliminate the strain arising from immediate gross payments in respect of risks which are retained marginally.
Q28.
What does the programme design address in addition to providing a stable experience to the net account and giving a sufficient balance at each year end?

a.

Fund accumulation

b.

Cash flow requirement

c.

Risk assessment

d.

Policy coverage

Discuss
Answer: (b).Cash flow requirement Explanation:The programme design addresses cash flow requirement as well, in addition to providing a stable experience to the net account and giving a sufficient balance at each year end.
Q29.
What helps the insurer to keep their well invested funds intact in situations where substantial gross payments need to be made immediately in respect of risks which are retained marginally?

a.

A credit facility

b.

A cash loss recovery facility

c.

An investment scheme

d.

A payment deferral facility

Discuss
Answer: (b).A cash loss recovery facility Explanation:A cash loss recovery facility is administered in all outward arrangements to eliminate the strain arising from immediate gross payments in respect of risks which are retained marginally, helping the insurer to keep their well invested funds intact.
Q30.
In a year of catastrophe, what must the programme design take care of?

a.

Ensuring adequate cover for the gross account

b.

Generating good reciprocal inward business

c.

Addressing cash flow requirements

d.

Spreading risks amongst the community of insurers

Discuss
Answer: (c).Addressing cash flow requirements Explanation:In a year of catastrophe, the strain to the resources of the insurer must be minimum provided the programme takes care of the cash flow requirement aspect as well.
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