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 5 of 24

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Q41.
How can a geographical concentration of risks affect an insurer's portfolio?

a.

It can expose a greater proportion of the portfolio to one large catastrophic event.

b.

It can help spread the risk evenly across the portfolio.

c.

It has no effect on an insurer's portfolio.

d.

None of the above

Discuss
Answer: (a).It can expose a greater proportion of the portfolio to one large catastrophic event. Explanation:A geographical concentration can expose a greater proportion of the portfolio to one large catastrophic event.
Q42.
In what way can a balanced portfolio be achieved for hail damage to crops?

a.

Through international exchange of risks.

b.

By denying coverage for hail damage.

c.

By pooling the risk with reinsurers.

d.

None of the above

Discuss
Answer: (a).Through international exchange of risks. Explanation:A balanced portfolio for hail damage to crops can be achieved through international exchange of risks.
Q43.
What is the Per Event retention managed through?

a.

Accumulation of funds for a catastrophe reserve

b.

Controlled and informed decisions

c.

Probable Maximum Number of individual risks involved in one event

d.

Both A and C

Discuss
Answer: (d).Both A and C Explanation:The Per Event retention is managed through reasonable estimation of financial consequences and by allowing a catastrophe reserve for funds to accumulate and be available over the long term.
Q44.
Which of the following is an example of accumulation within a branch?

a.

Earthquake and Windstorm

b.

Fire and Loss of Profit

c.

Hull and Cargo

d.

Hail damage to crops

Discuss
Answer: (b).Fire and Loss of Profit Explanation:Examples of event-based exposures can be: Possibility of accumulation within one branch... Accumulation between policies - Fire/Loss of Profit.
Q45.
What is the Probable Maximum Number (PMN) of individual risks involved in one event used for?

a.

To estimate the financial consequences of an event

b.

To manage the accumulation of funds for a catastrophe reserve

c.

To scale down the retention per risk

d.

To decide on the level of retention per event

Discuss
Answer: (c).To scale down the retention per risk Explanation:The Per Risk retention relates to the number of individual risks that could be hit by one event. The retention is scaled down accordingly... Retention per risk = Retention per event / P.M.N... P.M.N.= Probable Maximum Number of individual risks involved in one event.
Q46.
How is retention scaled down based on the quality of the risk in question?

a.

Uniform retention on poor risks and good risks alike

b.

Higher retention on perceptibly poor risks

c.

Lower retention on first class risks

d.

Both b and c

Discuss
Answer: (d).Both b and c Explanation:The level of retention is scaled down in a manner relevant to the quality of the risk in question with retention on a first class risk being much higher than that on a perceptibly poor risk.
Q47.
What is the meaning of P.M.N. in insurance?

a.

Probable Maximum Number of individual risks involved in one event

b.

Probable Minimum Number of individual risks involved in one event

c.

Probable Maximum Net income of an individual

d.

Probable Minimum Net income of an individual

Discuss
Answer: (a).Probable Maximum Number of individual risks involved in one event Explanation:P.M.N. stands for Probable Maximum Number of individual risks involved in one event in insurance.
Q48.
How is Per Risk retention managed?

a.

Through random decisions

b.

Through controlled and informed decisions

c.

Through uncontrolled decisions

d.

Through selective decisions

Discuss
Answer: (b).Through controlled and informed decisions Explanation:Per Risk retention is managed through controlled and informed decisions.
Q49.
What is Retention per risk?

a.

Retention per event divided by Probable Minimum Number of individual risks involved in one event

b.

Retention per event multiplied by Probable Maximum Number of individual risks involved in one event

c.

Retention per event divided by Probable Maximum Number of individual risks involved in one event

d.

Retention per event multiplied by Probable Minimum Number of individual risks involved in one event

Discuss
Answer: (c).Retention per event divided by Probable Maximum Number of individual risks involved in one event Explanation:Retention per risk is calculated by dividing retention per event by Probable Maximum Number of individual risks involved in one event.
Q50.
How are retentions scaled down in insurance?

a.

Uniformly for all risks

b.

Inversely proportional to the premium rates

c.

Without any specific criteria

d.

In proportion to the age of the policyholder

Discuss
Answer: (b).Inversely proportional to the premium rates Explanation:Retentions are scaled down in inverse proportion to the applicable premium rates in insurance.
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