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!

So, are you ready to put your Retentions knowledge to the test? Let's get started with our carefully curated MCQs!

Retentions MCQs | Page 3 of 24

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Q21.
Why may it not be desirable to sell stocks and shares to pay for a claim?

a.

It may not be the best moment to sell

b.

The cash would not be quickly realizable

c.

both a and b

d.

None of the above

Discuss
Answer: (c).both a and b Explanation:It may not be the best moment to sell and in some cases the cash would not be quickly realizable. Therefore, it may not be desirable to sell stocks and shares to pay for a claim.
Q22.
What is the importance of the management weighing the alternatives to arrive at the retention which represents the best solution for the insurer?

a.

It allows for balancing of priorities by the individual departments

b.

It helps to adjust the departments in question

c.

It factors in other general factors into the equation

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The management weighing the alternatives helps to arrive at the retention which represents the best solution for the insurer. This allows for balancing of priorities by the individual departments, helps to adjust the departments in question and factors in other general factors into the equation.
Q23.
What is the impact of a highly competitive market on an insurer's profitability?

a.

It has no impact

b.

It distorts the whole calculation of profitability and fluctuation

c.

It improves profitability

d.

It decreases profitability

Discuss
Answer: (b).It distorts the whole calculation of profitability and fluctuation Explanation:In highly competitive markets or markets where there is a discernible competitiveness, the whole calculation of profitability and fluctuation is distorted. If the portfolio increases in size, setting aside inflation, then it is probably because business has been obtained by cutting the rates of another insurer. In these circumstances, despite the “growth” the retention would be better left at existing levels.
Q24.
In what circumstances should an insurer increase their retention to preserve the acceptable degree of fluctuation of results?

a.

In times of bad results

b.

In times of good results

c.

When there is no inflation

d.

When there is economic inflation

Discuss
Answer: (d).When there is economic inflation Explanation:To preserve the calculated acceptable degree of fluctuation of results an increase in retention exactly equivalent to the economic inflation is called for. Failing this the insurer’s retention is effectively falling back. Inflation also tends to cause higher claims without compensatory increase in sums insured.
Q25.
What is the impact of a bad reinsurance market on an insurer's retention?

a.

It decreases retention

b.

It increases retention

c.

It has no impact

d.

It causes the insurer to drop certain types of policies

Discuss
Answer: (b).It increases retention Explanation:In times of bad results, reinsurers would normally tend to require higher retentions with the clear intention of causing the insurer to have a greater involvement in the losses and, by implication, provoke them to initiate some remedial action.
Q26.
When may an insurer consider reinsuring as much as possible?

a.

In times of bad results

b.

In times of good results

c.

When the supply of reinsurance exceeds demand

d.

When the demand for reinsurance exceeds supply

Discuss
Answer: (c).When the supply of reinsurance exceeds demand Explanation:There will however also be times when the supply of reinsurance exceeds demand. At such times, an insurer may be able to reinsure at terms which are so advantageous to him that he may consider it a shrewd financial move to reinsure as much as possible.
Q27.
What is the purpose of solvency margin regulation?

a.

To ensure that the insurer's liabilities are not excessive in proportion to their assets

b.

To determine which assets are allowable for calculation of solvency margin

c.

To stipulate certain minimum rules with reference to reserves

d.

To compel an insurer to adjust its retention upwards

Discuss
Answer: (a).To ensure that the insurer's liabilities are not excessive in proportion to their assets Explanation:Solvency margin regulation ensures that an insurer's liabilities are not excessive in proportion to their assets.
Q28.
What happens if an insurer fails to maintain an acceptable degree of fluctuation of results?

a.

The insurer's retention effectively falls back

b.

The insurer's supply of reinsurance exceeds demand

c.

The insurer earns higher return on their investment portfolio

d.

The insurer obtains more business by cutting the rates of another insurer

Discuss
Answer: (a).The insurer's retention effectively falls back Explanation:If an insurer fails to maintain an acceptable degree of fluctuation of results, their retention effectively falls back.
Q29.
In which circumstances should an insurer leave their retention at existing levels despite the "growth"?

a.

In highly competitive markets

b.

When the supply of reinsurance exceeds demand

c.

When the retention is falling back due to inflation

d.

When the insurer has earned higher return from stock market investments

Discuss
Answer: (a).In highly competitive markets Explanation:In highly competitive markets or markets where there is discernible competitiveness, an insurer should leave their retention at existing levels despite the "growth".
Q30.
What is the purpose of reinsurers requiring higher retentions during times of bad results?

a.

To cause the insurer to have a greater involvement in the losses

b.

To reinsure as much as possible

c.

To provoke the insurer to initiate remedial action

d.

To earn higher return on their investment portfolio

Discuss
Answer: (a).To cause the insurer to have a greater involvement in the losses Explanation:During times of bad results, reinsurers would normally require higher retentions with the clear intention of causing the insurer to have a greater involvement in the losses and provoke them to initiate some remedial action.
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