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 7 of 24

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Q61.
What is the approach followed by the majority of insurers to determine probable maximum loss exposure per event?

a.

Objective

b.

Subjective

c.

Mathematical

d.

Historical

Discuss
Answer: (b).Subjective Explanation:The majority of insurers still follow a subjective method to determine probable maximum loss exposure per event.
Q62.
What is the purpose of the schedule of retentions?

a.

To control exposures per risk

b.

To determine probable maximum loss

c.

To calculate reinsurance positions

d.

To modify the reinsurance cessions

Discuss
Answer: (a).To control exposures per risk Explanation:The schedule of retentions is designed to control exposures per risk.
Q63.
What modifications may be made to the schedule of retentions for cases where more than one risk can readily be affected by one event?

a.

Scaling down by a percentage the normal retention

b.

Fixing aggregate limits area-wise

c.

Both a and b

d.

None of the above

Discuss
Answer: (c).Both a and b Explanation:The modification may either be in the form of scaling down by a percentage the normal retention or by fixing aggregate limits area-wise.
Q64.
What modifications may be made to the schedule of retentions for cases where more than one risk can readily be affected by one event?What is PML?

a.

Scaling down by a percentage the normal retentionPotential maximum loss

b.

Fixing aggregate limits area-wiseProbable maximum loss

c.

Both a and bPremium maximum loss

d.

None of the abovePresent maximum loss

Discuss
Answer: (b).Both a and bProbable maximum loss Explanation:The modification may either be in the form of scaling down by a percentage the normal retention or by fixing aggregate limits area-wise.Gradually the practice has grown of expressing the retentions and reinsurance cessions in terms of PML (Probable Maximum Loss).
Q65.
Why do reinsurers insist on full underwriting data in respect of the large risks?

a.

To determine the premium amount

b.

To make their own assessment of PML

c.

To modify the reinsurance cessions

d.

None of the above

Discuss
Answer: (b).To make their own assessment of PML Explanation:In respect of the large risks, reinsurers insist on full underwriting data (including Risk Survey Reports) together with sums insured so that they can make their own assessment of PML before accepting specific reinsurance.
Q66.
What is the purpose of a schedule of retentions?

a.

To determine the PML exposure per event

b.

To control exposures per risk

c.

To modify the aggregate limits area-wise

d.

To simplify the procedures for reinsurance position

Discuss
Answer: (b).To control exposures per risk Explanation:The purpose of a schedule of retentions is to control exposures per risk.
Q67.
Which of the following is a catastrophe peril?

a.

Earthquake

b.

Hurricane

c.

Flood

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:Earthquake, hurricane, and flood are all considered as catastrophe perils.
Q68.
How is exposure per event controlled in areas with multiple risks affected by one event?

a.

By scaling down by a percentage the normal retention

b.

By fixing aggregate limits area-wise

c.

By increasing aggregate limits area-wise

d.

Either a or b

Discuss
Answer: (d).Either a or b Explanation:Exposure per event can be controlled by scaling down the normal retention by a percentage or by fixing aggregate limits area-wise.
Q69.
Why is it difficult to determine accumulation in catastrophe perils?

a.

It is difficult to demarcate the area exposed to one event

b.

It is difficult to ascertain the total net commitment within the area

c.

PML for one risk may differ from PML for another risk

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The difficulty in determining accumulation in catastrophe perils is due to the challenges of demarcating the area exposed to one event, ascertaining the total net commitment within the area, and differentiating PML for different risks.
Q70.
What is the purpose of catastrophe cover protection?

a.

To give elbow room to the ceding insurer in underwriting a risk

b.

To control exposure per event in areas with multiple risks affected by one event

c.

To protect the net account from catastrophe hazards

d.

To fix values for net sum insured retention per risk

Discuss
Answer: (c).To protect the net account from catastrophe hazards Explanation:The purpose of catastrophe cover protection is to protect the net account from catastrophe hazards.
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