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 the purpose of obtaining participations in the portfolio of risks of other insurers / reinsurers?
Discuss
Answer: (a).To diversify the net portfolio of the insurer Explanation:Obtaining participations in the portfolio of risks of other insurers / reinsurers helps in broadening the spread of the net portfolio of the insurer and reducing concentration risks.
Discuss
Answer: (d).It helps to ensure continuity, the right philosophy of business, friendship and understanding with the reinsurers Explanation:It is important for an insurer to have a good relationship with its reinsurers to ensure continuity, the right philosophy of business, friendship, and understanding. This is because good relationships with reinsurers help to provide effective reinsurance support.
Discuss
Answer: (a).To reduce losses Explanation:The purpose of reinsurance is to provide support to insurers in the event of losses. Reinsurance does not reduce losses but rather smooths out their effect on the insurer.
Discuss
Answer: (b).It helps to secure successful operation of the insurer with effective reinsurance support Explanation:Addressing the underlying problem of inadequate rates of direct business helps to secure successful operation of the insurer with effective reinsurance support. This is because reinsurance alone cannot solve the problem of inadequate rates of direct business, and the insurer needs to address this issue to ensure its long-term success.
Q25.
The primary objective of reinsurance is that it should reduce the insurer’s probability of β€˜ruin’ at a price acceptable to it . In what context is the word β€˜ruin’ used by an actuary?
Discuss
Answer: (b).Bankruptcy Explanation:In actuarial science, the term 'ruin' is used to describe the state of financial insolvency or bankruptcy for an insurance company. It refers to a situation where an insurer's losses exceed its available capital and reserves, leading to the inability to pay claims and obligations to policyholders. The primary objective of reinsurance is to reduce the probability of such ruin by transferring some of the risk to other insurance companies, at a price that is acceptable to the ceding insurer.
Discuss
Answer: (c).To even out wide fluctuations in the gross direct business by stabilising claims experience in the net retained account Explanation:
Discuss
Answer: (a).Whether to bear a risk by retaining more or passing the risk and earning a safe additional commission Explanation:In the context of commission earned on ceded business, the decision is between bearing a risk by retaining more or passing the risk and earning a safe additional commission.
Discuss
Answer: (b).It determines the anticipated incurred loss ratio to the gross and net accounts Explanation:The gross experience, over a period of say five years, of the class concerned is one of the important basis which determines the anticipated incurred loss ratio to the gross and net accounts in a class.
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.
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.
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