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 4 of 6

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Q31.
What is the relevance of reinsurance market conditions 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 deciding on the geographical location of operations

Discuss
Answer: (c).It helps in ensuring acceptability of the program to reinsurers Explanation:Reinsurance market conditions are relevant in reinsurance program design as it helps in ensuring acceptability of the program to reinsurers. This is important because the reinsurers are the ones who will provide the necessary coverage to the insurer in case of a loss. If the program is not acceptable to the reinsurers, it will be difficult for the insurer to get the required coverage. Therefore, it is important to design the reinsurance program in a way that is acceptable to the reinsurers. Option c correctly reflects this relevance. Options a, b, and d are not directly related to reinsurance market conditions.
Q32.
The anticipated incurred loss ratio to the gross and net accounts in a class are very good indices for measuring the effect of the programme on retentions. Which of the following is true in the context of gross direct account?

a.

The gross direct account is expected to sustain its loss ratio over a period of time.

b.

The gross direct account is expected to be subject to as wide a variation as the exposures permit.

c.

In good years the gross direct account will be relatively less and generate revenue for reinsurers.

d.

In bad years the gross direct account will be relatively higher and generate losses for reinsurers.

Discuss
Answer: (b).The gross direct account is expected to be subject to as wide a variation as the exposures permit. 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 programme on retentions. The gross direct account can be subject to wide variations depending on the exposures involved. Therefore, option b is the correct answer.
Q33.
What is the purpose of ceding arrangements in reinsurance?

a.

To improve the combined local retentions

b.

To increase the cost of reinsuring

c.

To reduce the adequacy of cover for the gross account

d.

To generate good reciprocal outward business

Discuss
Answer: (a).To improve the combined local retentions Explanation:Ceding arrangements are used to improve the combined local retentions and reduce the cost of reinsuring, while ensuring adequate cover for the gross account.
Q34.
How should reinsurance cessations be evaluated for outward arrangements?What factors should be considered when determining the economics of each ceding arrangement?

a.

By evaluating the risks on the basis of their loss ratiosCommissions obtained under each arrangement and the additional infrastructure involved in its administration

b.

By grouping the risks into their typesTypes of risks ceded and their loss ratios

c.

By assessing the commissions obtained under each arrangementReciprocal business and treaty balance

d.

By studying the additional infrastructure involved in its administrationSmall, medium, and large sized risks

Discuss
Answer: (a).By evaluating the risks on the basis of their loss ratiosCommissions obtained under each arrangement and the additional infrastructure involved in its administration 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.The economics of each ceding arrangement should be determined by considering the commissions obtained under each arrangement and the additional infrastructure involved in its administration.
Q35.
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.
Q36.
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.
Q37.
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.
Q38.
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.
Q39.
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.
Q40.
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.
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