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 11 of 24

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Q101.
What is the role of reinsurers in fixing retentions for engineering insurance?

a.

To prescribe the minimum level of retentions

b.

To eliminate the need for retentions

c.

To negotiate commission terms

d.

To provide technical assistance in matters of rating and other technical matters

Discuss
Answer: (a).To prescribe the minimum level of retentions Explanation:Reinsurers may prescribe minimum level of retentions at which they would be comfortable to accept cessions.
Q102.
What are the risks associated with ALOP/DSU coverage in engineering insurance?

a.

Increase in commission terms

b.

Decrease in retention levels

c.

Increase in risk exposure

d.

Decrease in profitability

Discuss
Answer: (c).Increase in risk exposure Explanation:The exposures get further aggravated if Advance Loss of Profit (ALOP) / Delay in Start-Up (DSU) coverage’s are associated with the material damage covers.
Q103.
In property insurance, the usual risk schedules of retention is based on several risk factors. Which of the following risk factors is not considered while preparing a risk schedule of retentions?

a.

Location

b.

Separation

c.

Demarcation

d.

Class of construction and fire protection

Discuss
Answer: (c).Demarcation Explanation:Risk schedules of retention in property insurance are prepared based on various factors that affect the risk profile of a property. Location, separation, class of construction, and fire protection are some of the factors that are considered while preparing a risk schedule of retentions. Demarcation, however, is not a factor that is usually considered in this context. Demarcation refers to the boundary or line that separates one property from another. While demarcation may be relevant in other contexts such as property ownership and boundary disputes, it is not considered a significant risk factor in property insurance.
Q104.
What is the most common method of reinsurance for motor insurance?

a.

Proportional reinsurance

b.

Excess of loss cover

c.

Facultative reinsurance

d.

Surplus reinsurance

Discuss
Answer: (b).Excess of loss cover Explanation:Excess of loss cover is the most common method of reinsurance for motor insurance.
Q105.
Which types of vehicles in motor insurance require excess of loss cover due to the high cost of fittings?

a.

Cars and trucks

b.

Buses and special-purpose vehicles

c.

Motorcycles and scooters

d.

Boats and yachts

Discuss
Answer: (b).Buses and special-purpose vehicles Explanation:Buses and special-purpose vehicles such as dumpers, cranes, bulldozers, etc., cost much and the portfolio of business may not be large enough to absorb the entire own damage loss on such vehicles to the net account and in that event excess of loss provides a working protection.
Q106.
What is the burning cost basis for rating excess of loss covers for motor insurance?

a.

Unlimited cover basis

b.

Agreed value basis

c.

Market value basis

d.

Burning cost basis

Discuss
Answer: (d).Burning cost basis Explanation:Excess of loss cover for motor insurance is rated on the burning cost basis, and that these covers continue to be rated on the burning cost basis with some adjustments.
Q107.
What is the main reason for excess of loss covers being suitable for workmen's compensation insurance?

a.

Large number of workmen exposed to risk at one place

b.

High cost of fittings and machinery

c.

Catastrophe perils such as hurricane or flood

d.

Accumulation hazard in respect of vehicle depots

Discuss
Answer: (a).Large number of workmen exposed to risk at one place Explanation:Workmen’s compensation insurance is well suited for protection by excess of loss covers, and that accumulation hazard is much greater here because a large number of workmen will be exposed to risk at one place.
Q108.
Why is it wise to reinsure out on a proportional basis any risks carrying high exposure or risks where the rate level is considered inadequate?

a.

To reduce the risk of accumulation hazard

b.

To save premium equivalent to the loading on the burning cost

c.

To reflect the gross underwriting result in the net results over a period

d.

To protect against catastrophe perils such as hurricane or flood

Discuss
Answer: (c).To reflect the gross underwriting result in the net results over a period Explanation:When the whole account is protected by a working excess of loss cover with a short payback period, the gross underwriting result gets fully reflected in the net results over a period. Hence it is wise to reinsure out on proportional basis any risks carrying high exposure or risks where the rate level is considered inadequate.
Q109.
What are the three major classes of miscellaneous accident business?

a.

Personal Accident, Cash-in-Transit and Burglary

b.

Motor, Property and Liability

c.

Marine, Aviation and Space

d.

Health, Life and Disability

Discuss
Answer: (a).Personal Accident, Cash-in-Transit and Burglary Explanation:The most important classes of miscellaneous accident business are Personal Accident, Cash-in-Transit, and Burglary.
Q110.
Which method of reinsurance is normally used in the Miscellaneous Department?

a.

Excess of loss

b.

Surplus basis

c.

Proportional

d.

Catastrophe

Discuss
Answer: (b).Surplus basis Explanation:The normal method of reinsurance in the Miscellaneous Department is surplus basis.
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