Retentions MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Retentions, 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 Retentions 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 Retentions mcq questions that explore various aspects of Retentions problems. Each MCQ is crafted to challenge your understanding of Retentions 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 Retentions MCQs are your pathway to success in mastering this essential IC85 Reinsurance Management topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Retentions. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

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Retentions MCQs | Page 1 of 24

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Q1.
What is retention in insurance?

a.

The amount of premium paid by the policyholder

b.

The proportion of risk that is retained by the cedant

c.

The amount of money paid out by the insurer in claims

d.

The amount of money retained by the insurer after paying out claims

Discuss
Answer: (b).The proportion of risk that is retained by the cedant Explanation:Retention in insurance refers to the proportion of risk that is retained by the cedant, which is the insurance company that issues the policy.
Q2.
What is the consequence of setting retention limits too low?

a.

Insurer cedes too large a part of their premium income to their reinsurers

b.

Insurer is exposed to retaining more when claims occur

c.

Insurer may become insolvent

d.

Insurer loses money on every policy issued

Discuss
Answer: (a).Insurer cedes too large a part of their premium income to their reinsurers Explanation:If management sets retention limits too low, they may find they are ceding too large a part of their premium income to their reinsurers.
Q3.
Who approves the retention limits in an insurance company?

a.

Shareholders

b.

Policyholders

c.

Management

d.

Reinsurers

Discuss
Answer: (c).Management Explanation:The limits for retention are set out by the management and approved by it.
Q4.
Are there any clearly defined formulas or rules to enable an insurer or reinsurer to decide on their retention?

a.

Yes, there are clearly defined formulas and rules

b.

No, there are no clearly defined formulas or rules

c.

It depends on the type of insurance

d.

It depends on the size of the insurance company

Discuss
Answer: (b).No, there are no clearly defined formulas or rules Explanation:There are no clearly defined formulas or rules to enable an insurer or indeed a reinsurer to decide on his retention.
Q5.
What is the basis for implementing reinsurances as arranged?

a.

The reinsurer's approval

b.

The policyholder's request

c.

The retention limits set by the management

d.

The premium income received by the insurer

Discuss
Answer: (c).The retention limits set by the management Explanation:The limits for retention are set out by the management and approved by it. These limits are the basis for implementing reinsurances as arranged.
Q6.
What is the basis for implementing reinsurances as arranged?Who determines the retention for each policy issued by an insurer?

a.

The reinsurer's approvalThe reinsurer

b.

The policyholder's requestThe policyholder

c.

The retention limits set by the managementThe underwriter

d.

The premium income received by the insurerThe regulator

Discuss
Answer: (c).The retention limits set by the managementThe underwriter Explanation:The limits for retention are set out by the management and approved by it. These limits are the basis for implementing reinsurances as arranged.The limits for retention are the basis for implementing reinsurances as arranged and are referred to by the underwriter in his day-to-day decisions for determining retention for each policy issued by his insurer.
Q7.
Is there a correct retention level for an insurer or reinsurer?

a.

Yes, there is a correct retention level

b.

No, there is no correct retention level

c.

It depends on the type of insurance

d.

It depends on the size of the insurance company

Discuss
Answer: (b).No, there is no correct retention level Explanation:There is no concept of a correct retention but only an optimum retention acceptable to the diverse interests.
Q8.
Who has a different subjective assessment of the acceptable level of retention in an insurer's office?

a.

Policyholders

b.

Regulators

c.

Finance manager, direct business underwriter, and shareholder

d.

Reinsurers

Discuss
Answer: (c).Finance manager, direct business underwriter, and shareholder Explanation:Within an insurers (reinsurers) office, the acceptable level of retention will be seen differently by different officials, such as the Finance manager, whose priority is to protect the insurer’s liquid assets, the direct business Underwriter, whose priority is to contain fluctuations in the insurer’s results, and the Shareholder, whose primary concern is preservation and return on capital.
Q9.
What is the impact of setting low retention limits?

a.

Insurers may cede too large a part of their premium income to reinsurers

b.

Insurers may expose themselves to retaining more when claims occur

c.

Insurers may protect their liquid assets

d.

Insurers may contain fluctuations in their results

Discuss
Answer: (a).Insurers may cede too large a part of their premium income to reinsurers Explanation:If management sets retention limits too low, insurers may find they are ceding too large a part of their premium income to their reinsurers.
Q10.
What is the basis for implementing reinsurances?

a.

Approved treaties and arrangements

b.

Insurers' retention limits

c.

Technical formulas and rules

d.

Subjective assessments of officials

Discuss
Answer: (a).Approved treaties and arrangements Explanation:The limits for retention are set out by the management and approved by it. These limits are the basis for implementing reinsurances as arranged and are referred to by the underwriter in his day-to-day decisions for determining retention for each policy as issued by his insurer.
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