SCI CRI – Certificate in Reinsurance Exam

Correct: Statement I is correct because the Monetary Authority of Singapore (MAS) FEAT principles mandate that financial institutions ensure fairness and accountability in AI to prevent systemic liability. Statement II is correct as reinsurers frequently manage technological uncertainty by imposing specific exclusions or restrictive terms when a ceding company lacks robust ethical governance frameworks.

Incorrect: The method of assuming automatic indemnity under the Personal Data Protection Act (PDPA) is incorrect because the Act imposes strict data protection obligations without providing blanket legal indemnification for data transfers. Pursuing a ‘follow the settlements’ argument for intentional regulatory breaches fails because this doctrine excludes losses caused by bad faith or gross negligence. Focusing only on treaty obligations while ignoring MAS technology risk management guidelines overlooks the fact that intentional non-compliance with regulatory standards is generally uninsurable.

Takeaway: Reinsurance risk assessment in Singapore must integrate MAS FEAT principles to address the liability and accumulation risks inherent in automated underwriting.

Correct: Statement I is correct because significant regulatory shifts in Singapore alter the underlying risk profile, necessitating communication with reinsurers to maintain the utmost good faith relationship. Statement III is correct as the Follow the Fortunes principle ensures reinsurers share the ceding company’s legal fate regarding bona fide claim settlements and judicial interpretations by Singapore courts.

Incorrect: The strategy of assuming reinsurers cover MAS fines fails because regulatory penalties are typically uninsurable under Singapore law to maintain the deterrent effect of the punishment. Pursuing the idea that reinsurers have unilateral cancellation rights based solely on MAS stress test results is incorrect. Treaty termination is governed by specific contractual notice periods and defined breach events rather than general regulatory performance. Focusing on combinations including these points ignores the legal reality that reinsurers do not indemnify for regulatory misconduct.

Takeaway: Reinsurance covers legal risk shifts through Follow the Fortunes but excludes regulatory fines and penalties due to Singapore public policy.

Correct: Casualty reinsurance involves long-tail risks where claims often manifest years after the policy period ends. Evaluating loss development patterns and reserving philosophy is essential to ensure the reinsurer can meet future obligations. This aligns with MAS expectations for robust risk assessment and technical due diligence in liability classes. Understanding the ceding company’s claims expertise ensures that complex industrial losses are managed effectively to mitigate ultimate loss ratios.

Incorrect: Focusing only on premium growth and marketing strategies fails to address the technical risk of loss volatility inherent in liability portfolios. The strategy of assessing property catastrophe models is misplaced as these tools do not address the specific frequency and severity characteristics of casualty risks. Relying solely on public financial statements and solvency ratios provides insufficient detail regarding the underlying quality of the specific industrial risks being ceded. Pursuing a review of geographical accumulation is more relevant for property lines than for assessing the technical adequacy of casualty pricing.

Takeaway: Casualty reinsurance underwriting must prioritize the analysis of long-tail loss development and the ceding company’s internal claims management capabilities.

Correct: Statement I is accurate because the Singapore Ministry of Health (MOH) Moratorium on Genetic Testing creates information asymmetry that reinsurers must account for in their risk pricing. Statement III is correct as biotechnological shifts can create systemic impacts on mortality and morbidity, leading to significant accumulation across multiple treaties.

Incorrect: The strategy of relying on proportional arrangements to bypass independent technical underwriting is flawed because these structures do not mitigate the fundamental uncertainty of emerging biotechnological risks. Choosing to believe that reinsurers can mandate predictive genetic testing for all applicants is incorrect as it directly contradicts the consumer protections provided by the Singapore MOH moratorium. The method of assuming that quota share treaties provide sufficient protection fails to address the systemic nature of genetic risks that can impact an entire portfolio simultaneously.

Takeaway: Reinsurers must evaluate anti-selection from genetic testing restrictions and manage systemic accumulation across life and health portfolios.

Correct: Reinsurers rely on the ceding company’s underwriting discipline to maintain the technical balance of a treaty. Conducting a targeted audit allows the reinsurer to verify if the decentralized authority aligns with the agreed risk appetite. This approach adheres to the principle of utmost good faith and ensures compliance with MAS expectations for robust reinsurance management.

Incorrect: Relying solely on historical performance and the follow the fortunes clause fails to address the fundamental change in the ceding company’s risk selection process. The strategy of switching to a non-proportional structure might reduce frequency exposure but does not solve the underlying issue of poor underwriting transparency. Focusing only on premium loadings and monthly reporting provides a financial buffer but ignores the qualitative deterioration of the underlying portfolio’s risk management.

Takeaway: Reinsurers must audit a ceding company’s underwriting controls when delegated authority changes to maintain treaty integrity and regulatory compliance.

Correct: Conducting a line-by-line verification against the treaty’s specific currency conversion clause ensures that the financial data reflects the actual legal agreement. This approach aligns with the Monetary Authority of Singapore (MAS) expectations for robust internal controls and accurate financial reporting. It ensures that the technical accounts and bordereaux are reconciled based on contractual facts rather than convenience. Proper documentation of this process is essential for audit trails and regulatory compliance under the Insurance Act.

Incorrect: Simply accepting the reinsurer’s figures to meet filing deadlines compromises the integrity of the ceding company’s financial data and violates basic accounting principles. The strategy of offsetting discrepancies in future periods through reserve adjustments leads to inaccurate financial reporting and masks underlying process failures. Relying solely on a broker-mediated compromise ignores the contractual requirements for currency conversion and may result in recurring accounting errors. Opting to ignore the root cause of the variance fails to meet the risk management standards expected by Singaporean regulators.

Takeaway: Accurate reconciliation requires verifying individual transactions against specific treaty provisions to ensure regulatory and contractual compliance.

Correct: In Singapore, reinsurance contracts are governed by the principle of utmost good faith and the implied warranty of legality. Under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA), firms must report suspicious transactions to the STRO. If an underlying claim arises from bribery, the reinsurer may void the contract as the risk was fundamentally altered by illegal acts. This approach ensures compliance with MAS expectations regarding anti-money laundering and countering the financing of terrorism (AML/CFT).

Incorrect: Relying solely on the ‘Follow the Fortunes’ doctrine is inappropriate when the underlying claim involves illegal acts that violate Singapore’s public policy. Simply applying international sanctions clauses is insufficient because bribery and trade sanctions are distinct legal issues requiring different evidentiary standards. The strategy of adjusting retention levels for future renewals fails to address the immediate legal and regulatory breach of the current contract. Focusing only on commercial settlement ignores the mandatory reporting obligations required by the Suspicious Transaction Reporting Office.

Takeaway: Reinsurers must prioritize statutory reporting under the CDSA over contractual ‘Follow the Fortunes’ clauses when bribery or corruption is suspected.

Correct: Surplus treaties allow life insurers to set a specific retention limit based on their risk appetite and capital strength. This mechanism effectively manages large individual exposures by ceding only the portion exceeding the retention. It aligns with MAS expectations for prudent risk management under the Insurance Act. This structure provides automatic capacity for policies within treaty limits while preserving the insurer’s underwriting authority.

Incorrect: The strategy of using Quota Share cedes a portion of every risk, including small policies the insurer could easily retain. This leads to unnecessary premium leakage and fails to target the specific volatility of large individual claims. Relying on Facultative Reinsurance for all high-value cases creates significant administrative burdens and delays policy issuance. It lacks the automaticity required for efficient business scaling and may lead to inconsistent coverage terms. Focusing only on Catastrophe Excess of Loss protects against accumulation of losses from a single event. However, it does not address the primary risk of a single, large, non-catastrophic death claim impacting the insurer’s financial stability.

Takeaway: Surplus treaties are the preferred method for life insurers to manage individual large-loss volatility while retaining smaller, more predictable risks.

Correct: Reinsurers must verify that ceding companies appropriately price risks influenced by education disparities to maintain treaty profitability. The Follow the Fortunes principle ensures the reinsurer remains aligned with the ceding company’s results. Proportional treaties effectively provide capital and capacity relief under the MAS RBC 2 framework.

Incorrect: The strategy of claiming the Singapore Insurance Act mandates fixed premium loadings or discounts based on education levels is factually incorrect. Focusing only on underwriting and follow the fortunes principles ignores the critical financial function of reinsurance in providing solvency support. The approach of excluding the role of capacity relief in proportional treaties fails to recognize its importance in Singapore’s RBC 2 framework. Choosing to believe that reinsurers are legally required to offer specific rates based on education levels misinterprets the regulatory environment in Singapore.

Takeaway: Reinsurers use underwriting reviews and proportional treaties to manage socio-economic risk volatility and support ceding company capital requirements.

Correct: Statement I is correct because the Personal Data Protection Act (PDPA) mandatory breach notification framework ensures data breaches are reported, which directly influences the frequency and transparency of claims hitting reinsurance layers. Statement II is correct as ‘silent cyber’ describes non-affirmative coverage where cyber perils are not explicitly excluded or included in traditional policies. Statement IV is correct because Clash Covers are essential for managing accumulation risk where one cyber event triggers multiple policies in a ceding company’s portfolio.

Incorrect: The strategy of claiming MAS mandates specific exclusions for third-party data privacy breaches is incorrect because MAS focuses on risk management frameworks rather than dictating specific treaty exclusion clauses. Relying on combinations that exclude the impact of the PDPA fails to recognize how Singapore’s regulatory environment directly shapes the loss landscape for reinsurers. Focusing only on affirmative cyber coverage ignores the significant market challenge of silent cyber risk within traditional reinsurance treaties. Choosing combinations that omit Clash Covers overlooks a primary mechanism used by reinsurers to mitigate systemic accumulation from a single digital catastrophe.

Takeaway: Effective cyber reinsurance requires managing both affirmative and silent risks while accounting for local regulatory reporting requirements like the PDPA.

Correct: Statements I, II, and III are correct. Thermal runaway in lithium-ion batteries creates significant accumulation risk because fire can easily spread between co-located units. MAS Notice 126 requires Singapore insurers to maintain a reinsurance management strategy that addresses the specific technical complexities of their insured portfolio. Facultative reinsurance is the standard approach for emerging technologies like BESS. This allows reinsurers to evaluate specific safety features and fire suppression systems before accepting the risk.

Incorrect: The combination focusing only on I and III is incomplete because it ignores the regulatory obligations under MAS Notice 126 regarding risk management. Combinations including statement IV are incorrect because the Singapore Insurance Act does not mandate 100% reinsurance for specific technologies. Relying on the idea of mandatory 100% reinsurance contradicts the fundamental principle of risk retention based on an insurer’s capital. The strategy of selecting II and IV fails as it includes a non-existent legal requirement while omitting the physical reality of battery accumulation risks.

Takeaway: Reinsuring emerging energy risks requires balancing technical facultative assessment with MAS-mandated risk management frameworks and accumulation monitoring.

Correct: Statement I is correct because disruptions to satellite-provided services like GPS or timing signals typically result in financial losses without physical damage to the insured’s ground property. Statement II is accurate as the Monetary Authority of Singapore (MAS) requires insurers to conduct robust stress testing for systemic events, including space weather, that cause correlated losses across portfolios.

Incorrect: The strategy of claiming space-based risks are exclusively facultative ignores how terrestrial property and casualty treaties often absorb the downstream economic impacts of service outages. Pursuing the notion that ‘follow the fortunes’ overrides specific exclusions is legally incorrect in Singapore, as reinsurers are only bound to settlements falling within the contractual scope. Focusing only on orbital parameters misses the reality that standardized business interruption clauses frequently trigger coverage for satellite-dependent industries.

Takeaway: Reinsurance for space-based risks must address systemic accumulation and the distinction between direct physical damage and contingent business interruption.

Correct: The Sanction Limitation and Exclusion Clause is a standard market provision used in Singapore to ensure compliance with MAS Notice 126. It stipulates that the reinsurer is not obligated to provide cover or pay claims if doing so violates Singaporean laws or United Nations resolutions. This clause protects the reinsurer from legal penalties and regulatory action by the Monetary Authority of Singapore. It effectively suspends the contractual liability to the extent of the legal prohibition.

Incorrect: Relying solely on the principle of contract sanctity fails because mandatory regulatory requirements in Singapore override private agreements. The strategy of depositing funds into an escrow account is generally insufficient as providing any financial benefit to a sanctioned entity remains a violation. Choosing to pay the ceding company first while seeking government indemnity is not a recognized legal procedure under the Insurance Act. Focusing only on the inception date of the policy ignores that sanctions typically apply to the act of payment itself.

Takeaway: Sanction clauses protect reinsurers by suspending payment obligations when fulfilling them would violate Singaporean or international legal restrictions.

Correct: Reinsurers must verify that the ceding company has updated its underwriting guidelines to distinguish between traditional human-related accidents and new systemic risks. This alignment is crucial for maintaining treaty profitability under the Insurance Act. It ensures that the ceding company is not inadvertently accumulating correlated risks from AI failures.

Incorrect: Relying solely on historical data is insufficient because past performance does not reflect the emerging risk landscape of automated environments. The strategy of applying broad exclusions may leave the ceding company with significant unhedged exposures, potentially impacting its solvency. Choosing to adjust commission structures focuses on financial incentives rather than addressing the underlying technical assessment of the new risk profile. Focusing only on retention levels fails to provide the reinsurer with a clear understanding of the actual quality of the underlying risks.

Takeaway: Reinsurers must evaluate how ceding companies adapt their underwriting to capture the shift from human error to systemic technological failures.

Correct: Defining ‘Loss Occurrence’ and ‘Hours Clauses’ precisely allows reinsurers to aggregate related losses into a single event, which is critical for managing systemic risks like civil commotion. Sub-limits provide a secondary layer of protection by capping the total payout for specific high-risk perils. This ensures the reinsurer maintains capital adequacy under the Monetary Authority of Singapore (MAS) risk-based capital framework. Such measures are essential when dealing with unpredictable socio-political shifts that can lead to widespread property damage across multiple locations.

Incorrect: The method of adjusting profit commissions focuses on financial incentives rather than directly controlling the physical accumulation of risk in volatile border areas. Relying solely on historical loss data is insufficient because refugee crises often represent structural shifts that past data cannot accurately predict. Pursuing an expansion of treaty capacity while relying on the Errors and Omissions clause misapplies a standard administrative protection to cover fundamental deficiencies in risk assessment and data quality.

Takeaway: Effective reinsurance for systemic risks requires precise event definitions and geographical limits to prevent unmanaged loss accumulation.

Correct: Exposure rating is critical when historical data fails to reflect current economic realities like energy-driven inflation. Non-proportional excess of loss treaties provide a robust shield against severity spikes. This approach ensures the insurer maintains adequate capital adequacy ratios as required by the Monetary Authority of Singapore under the RBC 2 framework. It allows for a more accurate assessment of potential losses based on current replacement values.

Incorrect: Increasing the ceding percentage in quota share arrangements fails to address the fundamental risk of increased claim severity. The strategy of shifting to purely facultative reinsurance is inefficient for managing portfolio-wide volatility and creates significant administrative overhead. Focusing only on historical experience rating without inflationary trending leads to underpricing and inadequate protection against future price shocks. Relying on nominal historical data ignores the systemic impact of energy costs on modern claim settlements.

Takeaway: Combine exposure rating with non-proportional reinsurance to mitigate the impact of energy-driven inflation on claim severity and solvency.

Correct: Non-proportional Excess of Loss treaties effectively protect the ceding company’s solvency against high-severity claims arising from autonomous system failures. Combining this with facultative reinsurance allows for the rigorous underwriting of unique, high-risk defense technologies. This dual approach satisfies MAS requirements for prudent risk management in emerging technology sectors. It ensures that the insurer maintains adequate capital under the Risk-Based Capital framework while addressing specific high-exposure contracts.

Incorrect: Relying solely on Quota Share treaties exposes the ceding company to a high volume of claims that could erode profitability without providing catastrophic protection. The strategy of using Surplus Treaties fails to account for the systemic risk where a single software bug impacts multiple insured units simultaneously. Focusing only on War and Terrorism exclusions creates a significant protection gap for civilian or border security malfunctions. These malfunctions often do not meet the legal definition of hostilities required for such exclusions to apply.

Takeaway: Reinsuring autonomous weapon risks requires blending treaty limits with facultative precision to address systemic software failures and high-severity liability.

Correct: Transitioning to a Claims-Made basis allows the reinsurer and ceding company to define a clear cutoff for liability based on when the claim is formally notified. This directly mitigates the long-tail risk associated with data stolen years prior but decrypted later. Requiring Post-Quantum Cryptography (PQC) standards aligns with MAS expectations for robust technology risk management. It ensures that the underlying risks are actively managed through modern encryption standards. This combination protects the reinsurer from systemic historical exposures while encouraging better risk hygiene.

Incorrect: The strategy of maintaining an Occurrence based structure fails because it leaves the reinsurer liable for data thefts occurring today that may only manifest as losses years later. Relying solely on standard cyber exclusions is dangerous as these clauses often focus on the act of the attack rather than the specific failure of cryptographic standards. Focusing only on increasing retention levels does not solve the fundamental problem of systemic accumulation or the difficulty in pricing long-term quantum uncertainty. The method of using a Losses Occurring During trigger for the decryption event creates immense legal ambiguity regarding the actual timing of the loss. It also ignores the fact that the original breach of security occurred during a different policy period.

Takeaway: Use Claims-Made triggers and specific cryptographic standards to manage the long-tail and systemic risks of quantum-enabled data decryption.

Correct: Statement I is correct because machine learning identifies complex, non-linear correlations in vast datasets to improve risk selection. Statement II is correct as the MAS FEAT Principles require fairness and transparency in all AI applications within the financial industry.

Incorrect: The strategy of allowing senior managers to delegate full responsibility for AI errors to vendors fails to meet the MAS Individual Accountability and Conduct standards. Focusing only on the idea that analytics lacks the capacity to influence capital allocation ignores its critical role in solvency management. Pursuing an AI framework without human oversight for vendor software contradicts Singapore’s regulatory focus on institutional accountability. Relying on the misconception that analytics is limited to loss projections misses the strategic breadth of modern risk modeling.

Takeaway: Reinsurance AI implementation requires balancing technical innovation with MAS standards for accountability, fairness, and transparency.

Correct: Facultative reinsurance allows the ceding company to access the specialized technical underwriting expertise of professional reinsurers for non-standard risks. This is critical for Singaporean insurers managing infrastructure modernization projects where historical loss data for new resilient technologies is limited. By placing these risks individually, the insurer ensures that the specific technological uncertainties are properly evaluated and priced. This approach aligns with the Monetary Authority of Singapore (MAS) expectations for robust risk assessment and capital management under the Risk-Based Capital (RBC 2) framework.

Incorrect: Relying solely on an existing Quota Share treaty may lead to significant coverage gaps if the treaty contains exclusions for unproven technologies or specialized engineering risks. The strategy of lowering attachment points on a Catastrophe Excess of Loss treaty focuses on the severity of events rather than the technical failure of the infrastructure itself. Opting for a portfolio-wide Stop Loss arrangement protects the overall loss ratio but fails to provide the necessary front-end underwriting discipline required for high-risk modernization projects. Simply increasing treaty limits does not address the fundamental need for the granular risk evaluation that unique infrastructure projects demand.

Takeaway: Use facultative reinsurance to manage unique or highly technical risks that require specialized underwriting expertise beyond standard treaty agreements.

Correct: A reinsurer must ensure the ceding company’s underwriting manual establishes clear boundaries for risk selection that align with the treaty’s technical intent. Verifying that authority limits are strictly defined for high-hazard risks prevents the accumulation of unintended exposures. This evaluation is consistent with MAS Guidelines on Risk Management Practices, which emphasize robust internal controls for insurers. Aligning documented criteria with historical loss data confirms the cedant’s underwriting discipline and the reliability of their risk assessment process.

Incorrect: The strategy of seeking formal approval from the Monetary Authority of Singapore for the manual is incorrect because the regulator focuses on oversight rather than approving individual internal operational documents. Relying solely on a comparison of premium rates against internal models is insufficient as it ignores the qualitative selection process and the cedant’s specific risk appetite. The method of prioritizing the frequency of manual updates over content quality fails to address whether the guidelines effectively mitigate exposure to complex or catastrophic risks. Focusing only on the presence of a compliance officer overlooks the technical necessity of evaluating the actual underwriting standards and risk selection logic.

Takeaway: Reinsurers must validate that a ceding company’s underwriting guidelines provide disciplined, technical frameworks for risk selection and clear internal authority levels.

Correct: The use of a Currency Conversion Clause is essential for establishing the specific exchange rate source and timing for multi-currency settlements. Currency fluctuations can lead to monetary inflation of claims, which may cause a loss to exceed the ceding company’s retention in Singapore Dollars. Furthermore, the MAS Risk-Based Capital (RBC 2) framework mandates that insurers hold capital against currency mismatches between their insurance liabilities and reinsurance recoverables. These elements ensure that the financial integrity of the reinsurance arrangement is maintained despite exchange rate volatility.

Incorrect: The method of using a Stability Clause to adjust exchange rates based on SIBOR is incorrect because these clauses address economic inflation rather than interest rate benchmarks. Relying on an approach that ignores the impact of currency movements on retention levels fails to account for the risk of claims creeping into higher layers. The strategy of overlooking MAS RBC 2 capital charges for currency mismatches results in an incomplete assessment of the insurer’s solvency requirements. Focusing only on premium translation while ignoring the valuation of technical provisions leads to significant inaccuracies in financial reporting.

Takeaway: Reinsurance management in Singapore requires aligning currency conversion clauses with MAS RBC 2 capital requirements to mitigate exchange rate volatility risks.

Correct: The 72-hour clause is a standard reinsurance provision used to define a single Loss Occurrence for events like riots or civil commotions. This allows the ceding company to aggregate multiple individual losses occurring within that timeframe into one claim against their retention. It aligns with MAS Notice 126 expectations for robust risk management and clear contractual boundaries in reinsurance arrangements.

Incorrect: The strategy of treating each individual shopfront as a separate occurrence fails because it forces the ceding company to pay multiple retentions for a single event. Relying solely on hypothetical government pools ignores the insurer’s duty under the Insurance Act to maintain adequate commercial reinsurance. Pursuing a Follow the Fortunes approach for ex-gratia payments is incorrect as these payments are typically excluded from standard indemnity recoveries.

Takeaway: Use the Hours Clause to aggregate related SRCC losses into a single occurrence for effective treaty recovery and retention management.

Correct: Determining retention levels requires a rigorous assessment of the ceding company’s financial strength and risk appetite. Under the MAS Risk-Based Capital framework, the retention must be sustainable relative to the insurer’s capital. This ensures that the insurer can absorb the maximum foreseeable loss from a single event or accumulation of risks. Proper risk assessment balances the cost of reinsurance against the volatility of retained losses. This alignment protects the insurer’s solvency and ensures long-term stability in the Singapore market.

Incorrect: Focusing only on maximizing premium retention ignores the fundamental risk of capital depletion during high-loss years. The strategy of benchmarking against industry averages is flawed because it fails to account for the specific risk profile and capital adequacy of the individual firm. Relying solely on underwriting confidence as a justification for high retention overlooks the objective financial constraints imposed by regulatory solvency requirements. Pursuing interest rate hedging as a primary factor for retention levels misidentifies the actuarial and risk-based drivers of property insurance liabilities.

Takeaway: Retention levels must be determined based on the insurer’s specific financial capacity and risk appetite to maintain MAS solvency compliance.

Correct: Non-proportional aggregate excess of loss treaties effectively cap the ceding company’s total exposure to systemic events like resource scarcity. Specific sub-limits for Contingent Business Interruption ensure that accumulation risk from interconnected supply chains is strictly monitored. Clear definitions of physical loss help align the reinsurer’s and cedant’s expectations regarding triggers in complex environmental scenarios. This approach follows MAS guidelines on robust risk management for emerging environmental and supply chain threats.

Incorrect: Relying on a standard proportional quota share treaty fails to address the potential for massive accumulation of losses across a concentrated industrial portfolio. Simply conducting facultative placements for every individual client proves administratively burdensome and fails to provide a holistic solution for treaty-level systemic risks. The strategy of focusing only on traditional property damage triggers ignores the reality that resource scarcity often manifests as non-damage business interruption. Choosing to maintain existing treaty structures without specific adjustments for supply chain dependencies leaves the ceding company vulnerable to solvency pressures.

Takeaway: Managing resource scarcity risks requires structured reinsurance that addresses accumulation through specific sub-limits and clear definitions of contingent triggers.

Correct: Statement I is correct because the shift to software-driven production increases cyber-physical risks, requiring reinsurers to clarify ‘silent cyber’ exposures in treaty wordings. Statement III is correct as reinsurers frequently utilize specific warranties to ensure ceding companies maintain rigorous quality control standards for emerging technologies. These measures help manage the technical uncertainty and potential for high-frequency losses in specialized manufacturing sectors.

Incorrect: The strategy of assuming decentralized production reduces accumulation risk is flawed because digital design flaws or software vulnerabilities can cause simultaneous global product failures. Relying on the belief that the Monetary Authority of Singapore certifies industrial manufacturing techniques is incorrect as regulators focus on financial stability rather than technical engineering approvals. Focusing only on physical distribution ignores the systemic nature of interconnected industrial IoT systems and shared digital assets.

Takeaway: Reinsurers must address systemic software-driven accumulation and utilize technical warranties when covering advanced manufacturing risks to ensure sustainable underwriting.

Correct: Statements I, III, and IV accurately reflect the evolving risk landscape for reinsurers in Singapore. 5G increases device density, creating systemic cyber accumulation that reinsurers must model carefully. Since 5G is a nascent technology, exposure rating is preferred over experience rating because historical data is insufficient. Facultative reinsurance provides the necessary bespoke underwriting for high-stakes 5G applications like autonomous vehicles.

Incorrect: The claim that Singapore law prohibits EMF exclusions is incorrect as reinsurers maintain contractual freedom to manage long-tail health risks. Relying on combinations that include the EMF prohibition fails to recognize standard market practices and regulatory allowances. Focusing only on cyber accumulation and pricing shifts misses the critical role of facultative support for specialized 5G infrastructure. Choosing combinations that omit exposure-based rating ignores the fundamental actuarial challenge of pricing emerging technology risks without historical precedents.

Takeaway: Reinsurers must adapt to 5G by addressing increased cyber accumulation and utilizing exposure-based pricing for data-scarce, high-tech risks.

Correct: Performing a cross-class accumulation analysis and reviewing BCN exclusion language allows the insurer to identify and quantify specific coverage gaps. Negotiating specialized write-back coverage or facultative reinsurance provides the necessary risk transfer for these high-severity biological perils.

Incorrect: Relying solely on general war exclusions is legally risky because bioterrorism is often distinct from formal warfare. The strategy of increasing retentions fails to provide protection if the underlying peril is explicitly excluded. Opting for the assumption that biological contamination is a standard peril ignores the specific BCN exclusions typically found in property reinsurance contracts.

Takeaway: Managing biological risks requires identifying accumulation across portfolios and addressing specific treaty exclusions through specialized reinsurance solutions.

Correct: Facultative reinsurance allows for precise underwriting of unique risks like CCS that standard treaties cannot adequately address. Incorporating technical assessments and specific seepage triggers aligns with MAS expectations for robust environmental risk assessment. Commutation clauses help manage the extreme long-tail nature of sequestration liabilities by providing a mechanism to settle future obligations.

Incorrect: Relying on a standard proportional treaty fails to address the high-severity, non-standard nature of CCS risks which may exceed treaty limits or exclusions. The strategy of using claims-made triggers without reinsurance ignores the reality that sequestration leaks often manifest years after the operational phase ends. Focusing only on finite risk structures prioritizes financial engineering over genuine risk transfer, which may not meet MAS regulatory standards for capital relief.

Takeaway: Reinsuring CCS risks requires specialized facultative underwriting and specific contractual triggers to manage unique long-tail environmental liabilities and technical complexities.

Correct: Negotiating a write-back for specific limited perils or sub-limits allows the ceding company to maintain a degree of coverage for defined events while managing the reinsurer’s exposure to systemic risk. This balanced approach ensures the insurer remains within its board-approved risk appetite under the MAS Risk-Based Capital framework. It provides a structured way to offer essential coverage to clients without exposing the firm to unquantifiable losses. This method demonstrates proactive risk management and alignment with regulatory expectations for solvency and capital stability.

Incorrect: Relying solely on internal catastrophe reserves to cover systemic pandemic risks often leads to significant capital volatility and potential insolvency during widespread events. The strategy of moving an entire portfolio to facultative reinsurance is typically administratively prohibitive and fails to provide the automatic capacity needed for large books of business. Choosing to reclassify risks between different lines of business to bypass specific exclusions represents a failure of underwriting integrity. This method also ignores the reality that reinsurers apply similar exclusions across all affected treaty categories during global crises.

Takeaway: Manage systemic pandemic risks by balancing treaty exclusions with specific write-backs and adjusted retention levels to protect institutional solvency.