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 13 of 24

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Q121.
What is the purpose of a quota share treaty?

a.

To fully utilize the retention capacity of the insurer in all cases.

b.

To determine the retention that can be supported by the portfolio of the ceding insurer.

c.

To protect the retained liability against the larger claims through working excess of loss covers.

d.

To provide a satisfactory solution only where the pattern of exposures per vessel shows clustering around a certain level.

Discuss
Answer: (d).To provide a satisfactory solution only where the pattern of exposures per vessel shows clustering around a certain level. Explanation:A quota share treaty can be a satisfactory solution only where the pattern of exposures per vessel shows clustering around a certain level.
Q122.
What is the first step in determining the retention that can be supported by the portfolio of the ceding insurer?

a.

Determining the total loss and general average claims affecting all cargo on board the vessel.

b.

Creating a schedule of retentions with limits per bottom for different sizes and ages of vessels.

c.

Scaling down the retention for smaller and older vessels.

d.

Fixing the retention at aggregate sums insured per vessel through all documents.

Discuss
Answer: (a).Determining the total loss and general average claims affecting all cargo on board the vessel. Explanation:The first step is to determine the retention which can be supported by the portfolio of the ceding insurer. Loss exposures fall into two distinct classes, viz. i. Total loss and ii. General average which affect all cargo on board the vessel and particular average claims which need not affect all the cargo.
Q123.
How is excess of loss protection used by insurers?

a.

To fully utilize the retention capacity of the insurer in all cases.

b.

To determine the retention that can be supported by the portfolio of the ceding insurer.

c.

To protect the retained liability against the larger claims through working excess of loss covers.

d.

To provide a satisfactory solution only where the pattern of exposures per vessel shows clustering around a certain level.

Discuss
Answer: (c).To protect the retained liability against the larger claims through working excess of loss covers. Explanation:This has given rise to the practice of insurers raising their retention per vessel to higher figures and protecting the retained liability against the larger claims through working excess of loss covers.
Q124.
How is the extent of cover necessary for excess of loss protection determined?

a.

After studying the pattern of exposures in the portfolio.

b.

By scaling down the retention for smaller and older vessels.

c.

By fixing the retention at aggregate sums insured per vessel through all documents.

d.

By determining the total loss and general average claims affecting all cargo on board the vessel.

Discuss
Answer: (a).After studying the pattern of exposures in the portfolio. Explanation:The extent of cover necessary is determined after taking into account the pattern of exposures.
Q125.
Why is it common practice to place excess of loss cover on a per voyage per event basis?

a.

To provide protection for accumulation on shore.

b.

To fully utilize the retention capacity of the insurer in all cases.

c.

To protect the retained liability against the larger claims through working excess of loss covers.

d.

To provide a satisfactory solution only where the pattern of exposures per vessel shows clustering around a certain level.

Discuss
Answer: (a).To provide protection for accumulation on shore. Explanation:It is common practice to place the excess of loss cover on per voyage per event basis so that it also provides protection for accumulation on shore.
Q126.
What is the purpose of splitting the cover into layers in excess of loss cover?

a.

To provide protection for accumulation on shore

b.

To reduce the premium for excess of loss cover

c.

To avoid large losses or exposures on shore

d.

To provide automatic reinsurance facility

Discuss
Answer: (c).To avoid large losses or exposures on shore Explanation:Splitting the cover into layers helps in avoiding large losses or exposures on shore. It is because the higher layers are rated on a subjective assessment of the accumulation hazard at ports.
Q127.
How is the technical rating of the basis cover determined?

a.

By calculating the pro-rata premium for total loss cover and a suitable extra for the large GA claims

b.

By studying the working exposures and a calculation of the pro-rata premium for total loss cover and a suitable extra for the large GA claims

c.

By adding a further premium on for the shore accumulations

d.

By deriving rates from the claims record

Discuss
Answer: (b).By studying the working exposures and a calculation of the pro-rata premium for total loss cover and a suitable extra for the large GA claims Explanation:The technical rating of the basis cover is determined by studying the working exposures and a calculation of the pro-rata premium for total loss cover and a suitable extra for the large GA claims.
Q128.
What is a voyage register used for in the cargo department?

a.

To determine recovery due from reinsurers

b.

To secure automatic reinsurance facility per bottom up to the maximum foreseeable extent

c.

To enter individual insurances

d.

To maintain documents up to a particular size

Discuss
Answer: (c).To enter individual insurances Explanation:A voyage register is used to enter individual insurances in the cargo department.
Q129.
Why is automatic reinsurance facility essential in designing surplus treaties in the cargo department?

a.

To secure maximum foreseeable extent

b.

To avoid large losses or exposures on shore

c.

To provide protection for accumulation on shore

d.

The commitment per voyage gets established only after all documents are entered in the voyage register

Discuss
Answer: (d).The commitment per voyage gets established only after all documents are entered in the voyage register Explanation:The commitment per voyage gets established only after all documents are entered in the voyage register, by which time the voyage may already have been completed. Hence, automatic reinsurance facility is essential.
Q130.
What is the primary objective in designing surplus treaties in the cargo department?

a.

To provide automatic reinsurance facility per bottom up to the maximum foreseeable extent

b.

To secure a premium for excess of loss cover

c.

To split the cover into layers

d.

To maintain a voyage register

Discuss
Answer: (a).To provide automatic reinsurance facility per bottom up to the maximum foreseeable extent Explanation:The primary objective in designing surplus treaties in the cargo department is to provide automatic reinsurance facility per bottom up to the maximum foreseeable extent.
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