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 5 of 6

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Q41.
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.
Q42.
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.
Q43.
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.
Q44.
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.
Q45.
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.
Q46.
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.
Q47.
What is the correct approach for the evaluation of outward arrangements?

a.

To evaluate each arrangement-wise assessment of reinsurance cessations

b.

To group the risks into their types based on their loss-ratios

c.

To analyze the commissions obtained under each arrangement and the additional infrastructure involved in its administration

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:For the purpose of the evaluation of outward arrangements, the correct approach is to make an arrangement-wise assessment of reinsurance cessations, evaluate the risks ceded to each arrangement based on their loss-ratios by grouping them into their types, and analyze the commissions obtained under each arrangement and the additional infrastructure involved in its administration. Therefore, the correct approach is all of the above.
Q48.
In a year of catastrophe, the reinsurance programme should be designed in such a manner that ________________

a.

The strain on the resources of the insurer must be maximum

b.

The strain on the resources of the insurer must be minimum

c.

The invested funds have a cash loss estimation facility

d.

The invested funds manage a good cash flow

Discuss
Answer: (b).The strain on the resources of the insurer must be minimum Explanation:In a year of catastrophe, the strain to the resources of the insurer must be minimum provided the programme takes care of this aspect. The programme should be designed to provide a stable experience to the net account and give a sufficient balance at each year-end provided the gross rates are adequate. A cash loss recovery facility is administered in all outward arrangements to eliminate the strain arising from the substantial gross payments needed to be made immediately in respect of risks which are retained marginally.
Q49.
What is the basic role of reinsurance?

a.

To protect gross business

b.

To safeguard solvency against fluctuations in claims experience and accumulation of losses

c.

To administer cash loss recovery facility

d.

To evaluate and follow up on programme design

Discuss
Answer: (b).To safeguard solvency against fluctuations in claims experience and accumulation of losses Explanation:The basic role of reinsurance is to safeguard the solvency of an insurer against random fluctuations in the overall claims experience and an accumulation of losses arising out of one event.
Q50.
What is the purpose of a cash loss recovery facility in outward arrangements?

a.

To eliminate strain arising from making substantial gross payments in respect of retained marginal risks

b.

To keep invested funds intact

c.

To safeguard solvency against fluctuations in claims experience and accumulation of losses

d.

Both a and b

Discuss
Answer: (d).Both a and b Explanation:A cash loss recovery facility in outward arrangements helps to eliminate strain arising from making substantial gross payments in respect of retained marginal risks and helps the insurer to keep their well-invested funds intact.
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