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.
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.
Q22.
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.
Q23.
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.
Q24.
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.
Q25.
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.
Q26.
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.
Q27.
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.
Q28.
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.
Q29.
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.
Q30.
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.
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