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 9 of 24

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Q81.
What is the basis for rating the first layer of catastrophe cover?

a.

Underwriting data and past record of large losses

b.

Limit of cover provided and negotiation of rates

c.

Reinstatement provisions and ceding insurer's profit

d.

Co-insurance and facultative cover

Discuss
Answer: (a).Underwriting data and past record of large losses Explanation:The rating of the first layer of catastrophe cover depends very much on the underwriting data and past record of large losses.
Q82.
What is the concern of reinsurers regarding the ceding insurer on catastrophe covers?What is the purpose of a second surplus treaty?

a.

The profit of the ceding insurer is well secured.To cede the surplus in excess of the first surplus treaty limits

b.

Reinsurers rarely share the fortunes of the ceding insurer on catastrophe covers.To provide bordereaux for peak risks

c.

Ceding insurers should be compelled to support the catastrophe nature of such covers.To determine the optimum capacity of the treaty

d.

Reinsurers may lose several years' premium in one loss.To exchange against incoming business

Discuss
Answer: (b).Reinsurers rarely share the fortunes of the ceding insurer on catastrophe covers.To cede the surplus in excess of the first surplus treaty limits Explanation:Reinsurers are growing increasingly concerned at the fact that they rarely share the fortunes of the ceding insurer on catastrophe covers.The surplus in excess of the first surplus treaty limits is ceded through a second surplus treaty.
Q83.
What is the concern of reinsurers regarding the ceding insurer on catastrophe covers?

a.

The profit of the ceding insurer is well secured.

b.

Reinsurers rarely share the fortunes of the ceding insurer on catastrophe covers.

c.

Ceding insurers should be compelled to support the catastrophe nature of such covers.

d.

Reinsurers may lose several years' premium in one loss.

Discuss
Answer: (b).Reinsurers rarely share the fortunes of the ceding insurer on catastrophe covers. Explanation:Reinsurers are growing increasingly concerned at the fact that they rarely share the fortunes of the ceding insurer on catastrophe covers.
Q84.
What do reinsurers require regarding the portfolio of business ceded under Auto/Fac cover?

a.

Detailed information

b.

Limited information

c.

Waiving of bordereaux

d.

Exchange against incoming business

Discuss
Answer: (a).Detailed information Explanation:Reinsurers require some detailed information regarding the portfolio of business ceded under Auto/Fac cover, although they may still agree to waive bordereaux.
Q85.
What should be done when the Auto/Fac cover contains only peak risks and a large reinsurance capacity is required?

a.

Provide bordereaux

b.

Build up a treaty with a reasonable balance

c.

Accept shares without insisting on any bordereaux

d.

Try out different limits and note the resultant premium to liability balance

Discuss
Answer: (a).Provide bordereaux Explanation:When the Auto/Fac cover contains only peak risks and a large reinsurance capacity is required, it may be worthwhile providing bordereaux.
Q86.
What factors affect the rating of the first layer of catastrophe cover?

a.

Past record of large losses

b.

Underwriting data

c.

Negotiation of rates

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The rating of the first layer of the catastrophe cover depends on the underwriting data and past record of large losses. There is scope for negotiation of rates.
Q87.
What is the concern of reinsurers regarding catastrophe covers?

a.

They rarely share the fortunes of the ceding insurer on catastrophe covers.

b.

The profit of the ceding insurer may be well secured.

c.

The reinsurer on the catastrophe cover may lose several years’ premium in one loss.

d.

Both a and c

Discuss
Answer: (d).Both a and c Explanation:Reinsurers are growing increasingly concerned that they rarely share the fortunes of the ceding insurer on catastrophe covers. While the profit of the ceding insurer may be well secured, the reinsurer on the catastrophe cover may lose several years’ premium in one loss.
Q88.
What is the potential solution to the problem of catastrophe covers that reinsurers may consider?

a.

Enforcing a 10% co-insurance on the catastrophe layer

b.

Restricting the reinstatement provisions

c.

Both a and b

d.

None of the above

Discuss
Answer: (c).Both a and b Explanation:Reinsurers may think of enforcing a 10% co-insurance on the catastrophe layer and also restrict the reinstatement provisions to make ceding insurers aware of the problem of catastrophe covers.
Q89.
How is the surplus in excess of the first surplus treaty ceded?

a.

Through a second surplus treaty

b.

Through Auto/Fac cover

c.

Facultatively

d.

All of the above

Discuss
Answer: (d).All of the above Explanation:The surplus in excess of the first surplus treaty limits is ceded through a second surplus treaty, Auto/Fac cover, and facultatively. Rarely, a third surplus treaty exists.
Q90.
What is the maximum liability for the second surplus treaty determined by?

a.

Reference to the premium ceded under the treaty

b.

Reference to the underwriting data

c.

Reference to the past record of large losses

d.

None of the above

Discuss
Answer: (a).Reference to the premium ceded under the treaty Explanation:The maximum liability for the second surplus treaty is determined by reference to the premium ceded under the treaty.
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