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 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.
Q32.
What is the purpose of reinsurance?

a.

To reduce losses

b.

To make the road smoother

c.

To secure technical assistance

d.

To handle a new class of business separately from the general net account

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.
Q33.
What is the importance of addressing the underlying problem of inadequate rates of direct business?

a.

It ensures that the shock absorbers do not become worn out

b.

It helps to secure successful operation of the insurer with effective reinsurance support

c.

It helps to improve the insurer's credit rating

d.

None of the above

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.
Q34.
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.
Q35.
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.
Q36.
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.
Q37.
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.
Q38.
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.
Q39.
What is the purpose of the cash loss recovery facility in outward arrangements?

a.

To provide liquidity to the insurer

b.

To ensure adequate cover for the gross account

c.

To generate good reciprocal inward business

d.

To reduce the cost of reinsuring

Discuss
Answer: (a).To provide liquidity to the insurer Explanation:The cash loss recovery facility is administered in all outward arrangements to help the insurer keep their well-invested funds intact and eliminate the strain arising from substantial gross payments that need to be made immediately in respect of risks that are retained marginally. Therefore, the purpose of the cash loss recovery facility is to provide liquidity to the insurer.
Q40.
What is the primary purpose of reinsurance?

a.

To spread risks amongst the community of insurers

b.

To reduce the cost of reinsuring

c.

To ensure adequate cover for the gross account

d.

To generate good reciprocal inward business

Discuss
Answer: (a).To spread risks amongst the community of insurers Explanation:The very purpose of reinsurance is to spread risks amongst the community of insurers who can then support each other in bad times. Therefore, the primary purpose of reinsurance is to spread risks amongst the community of insurers.
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