CMFAS Reinsurance Premium Quiz 11

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Question 1 of 30

1. Question
Which of the solutions offered below can be considered true when you think about reinsurance definition?
- A reinsurance operation is a contractual arrangement between a reinsurer and a professional insurer, where the responsibility holds on both parts.
- A reinsurance operation is a mutual contractual arrangement between two people however without much of responsibility of any kind.
- A reinsurance operation is a contractual arrangement between a reinsurer and a professional insurer who alone is fully responsible to the policyholder.
- A reinsurance operation is a contractual arrangement between a reinsurer and an insurer where both of them are fully responsible to the policyholder.
Correct

Incorrect

Through reinsurance is understood an agreement between two parts where the insurer is fully responsible to the policyholder.
Question 2 of 30

2. Question
Why companies are companies seeking multi-line policy, which is the main purpose and the correct sentence?
- A multi-line policy is an insurance policy used by companies seeking to cover their tracks; the standard multiline policy contains common policy declarations and conditions, and specific coverages (with their own declarations, coverage forms and causes of loss forms).
- A multi-line policy is an insurance policy used by companies seeking to cover multiple perils; the standard multiline policy contains only common specific coverages in their declarations.
- A multi-line policy is an insurance policy used by companies seeking to cover multiple perils; the standard multiline policy contains common policy declarations and conditions, and specific coverages (with their own declarations, coverage forms and causes of loss forms). If a loss occurs in any of the mentioned perils, the ceding company is covered to a net amount that reflects an overarching deductible and cap.
- A multi-line policy is an insurance policy used by companies seeking to cover multiple perils. If a loss occurs in any of the mentioned perils, the ceding company can lose its net amount that reflects an overarching deductible and cap.
Correct

Incorrect

The companies are choosing a multi-line policy to insure their companies when they want to seek and cover multiple perils.
Question 3 of 30

3. Question
How do people in general name the reinsurance, “the insurance for…”?
- Insurance companies.
- Homeowners.
- Small businesses.
- Any business general.
Correct

Incorrect

Most of the time, the name used by people to call the reinsurance is insurance used for the companies.
Question 4 of 30

4. Question
What is the main reason most of the time an insurance company may want reinsurance coverage?
- Income transfer, risk smoothing.
- Risk transfer, income smoothing.
- Money transfer, income smoothing.
- Risk transfer, revenue smoothing.
Correct

Incorrect

There are multiple reasons someone would need insurance. However, most of the time the main reason is to limit the risk transfer and handle the revenue process easier.
Question 5 of 30

5. Question
How would the mortgage default securitization insurance be linked to security considering the following from below?
- Mortgage default securitization insurance-linked security that permits mortgage purchasers to obtain default insurance through securities rather than the purchase of a standard insurance policy.
- Mortgage default securitization insurance-linked security that permits mortgage purchasers to obtain default insurance through securities rather than the purchase of a standard insurance policy.
- Mortgage default securitization insurance-linked security that permits mortgage purchasers to obtain default insurance through securities rather than the purchase of a standard insurance policy.
- Mortgage default securitization insurance-linked security that permits mortgage purchasers to obtain default insurance through securities rather than the purchase of a standard insurance policy.
Correct

Incorrect

The scope of using a mortgage default securitization insurance is to exactly have securities through the insurance. It gives the options of having the mortgage purchased by default compared to a standard insurance one.
Question 6 of 30

6. Question
How are the sales and marketing activities of insurers known as, considering the below variants?
- Claims adjusting.
- Underwriting.
- Reinsurance.
- Production.
Correct

Incorrect

The marketing activities part of the insurers work activity are marked as production.
Question 7 of 30

7. Question
Which of the below do you consider to be a true statement regarding treaty reinsurance?
I. Treaty reinsurance is insurance purchased by an insurance company.
II. Treaty reinsurance is insurance purchased by an insurance company from another insurer.
III. Treaty reinsurance is insurance purchased by an insurance company from another person.
IV. Treaty reinsurance is insurance purchased by any company from another insurer.
- I & II
- II & III
- III & IV
- None of the above
Correct

Incorrect

Treaty reinsurance is used by an insurance company most of the time from another person also called the insurer.
Question 8 of 30

8. Question
Which of the variants from below can be considered true when you think about reinsurance pools?
- The reinsurance pools is a risk financing mechanism used by insurance companies to increase their ability to underwrite specific types of risks.
- The reinsurance pools is a risk financing mechanism used by insurance companies to decrease their ability to underwrite specific types of risks.
- The reinsurance pools is a generic mechanism used by insurance companies to increase their ability to underwrite specific types of risks.
- The reinsurance pools is a risk financing mechanism used by companies in general to increase their ability to underwrite specific types of risks.
Correct

Incorrect

Reinsurance pools include some financial risks used by insurance companies to increase their own power of adding them into the policy as type of certain risks.
Question 9 of 30

9. Question
What does the quota share refer to most of the time if you consider the options given here?
- Quota share treaty is a pro-rata reinsurance contract in which the insurer and reinsurer share premiums and losses according to a fixed percentage.
- Quota share treaty is an approximative rata reinsurance contract in which the insurer and reinsurer share premiums according to a fixed percentage.
- Quota share treaty is a pro-rata reinsurance contract in which the insurer share premiums and losses according to a flexible percentage.
- Quota share treaty is like any reinsurance contract in which the insurer and reinsurer share premiums and losses according to a fixed percentage.
Correct

Incorrect

By definition, the quota share treaty is a pro-rata reinsurance contract. One of the main clauses is that both the insurer and the reinsurer share some premiums but also losses according to a fixed percentage.
Question 10 of 30

10. Question
What does the definition of the partial insurance cover considering the examples given to you?
I. Can cover property such as the home.
II. Partial insurance can cover a vehicle.
III. Partial insurance can cover your health.
IV. Insurance policies cover many different types of assets.
- I & II
- II & III
- III & IV
- All of the above
Correct

Incorrect

The partial insurance cover home, vehicle, life and multiple other types of assets.
Question 11 of 30

11. Question
Which variants provided below about life reassurance can be considered to be a correct statement?
- Life reinsurance is used by life and health insurers to manage their profitability and only to access services provided by third-party reinsurers.
- Factors expected to drive growth in life reinsurance include an ageing population in mature markets and progressive urbanization.
- Life reinsurance is commonly used by life and health insurers to manage their profitability, risk and capital, and to access services provided by third-party reinsurers.
- Life reinsurance is used only by life and health insurers to manage their risk and to access services provided by third-party reinsurers.
Correct

Incorrect

By life reassurance, it gives access to services provided by third-party reinsurers. most of the time it is used for life and health situations.
Question 12 of 30

12. Question
Which phrases related to the proportional agreement you consider to be true?
I. Proportional agreements, such as the quota share and surplus share arrangements discussed immediately.
II. Proportional agreements call for the insurer and reinsurer to share premiums.
III. Proportional agreements call for the insurer and reinsurer to share exposures.
IV. Proportional agreements call for the insurer and reinsurer to share losses.
- I & II
- II & III
- III & IV
- All of the above
Correct

Incorrect

When we talk about the proportional agreement, quora share, share premiums, exposures and losses are all part of this.
Question 13 of 30

13. Question
How does the excess of loss agreements differ compared to the other ones that you already learned?
- Excess of Loss (XOL) agreements, call for the insurer and reinsurer to allocate risks and returns in specific horizontal or vertical layers (as noted in the simple example earlier).
- Excess of Loss (XOL) agreements, call for the reinsurer to allocate risks and returns in specific horizontal or vertical layers (as noted in the simple example earlier).
- Excess of Loss (XOL) agreements, call for the insurer to allocate risks and returns in specific horizontal or vertical layers (as noted in the simple example earlier).
- Excess of Loss (XOL) agreements, call for the insurer and reinsurer only to returns in specific horizontal or vertical layers (as noted in the simple example earlier).
Correct

Incorrect

The XOL agreements include both the insurer and the reinsurer in order to split the risks according to an agreement.
Question 14 of 30

14. Question
What does the surplus share (SS) structure implies and agrees on having the below options?
- The surplus share (SS) structure the reinsurer agrees to reaccept risk on a variable percentage basis above the insurer’s retention limit, up to some defined maximum and pays the insurer a ceding commission for a share in the secondary.
- The surplus share (SS) structure the reinsurer agrees to accept risk on a variable percentage basis above the insurer’s retention limit, up to some defined minimum and pays the insurer a ceding commission for a share in the premium.
- The surplus share (SS) structure the reinsurer agrees to accept risk on a variable percentage basis below the insurer’s retention limit, up to some defined maximum and pays the insurer a ceding commission for a share in the premium.
- The surplus share (SS) structure the reinsurer agrees to accept risk on a variable percentage basis above the insurer’s retention limit, up to some defined maximum and pays the insurer a ceding commission for a share in the premium.
Correct

Incorrect

When the reinsurer agrees to accept risk on a variable percentage basis above the insurer’s retention limit, then it means it refers to the surplus shared structure.
Question 15 of 30

15. Question
Which of the below are considered to be true, valid reinsurance and used most often?
I. Facultative reinsurance.
II. Treaty reinsurance.
III. Surplus share reinsurance.
IV. Excess of loss reinsurance.
- I & II
- II & III
- III & IV
- All of the above
Correct

Incorrect

All of the variants offered are true and valid type of reinsurance used most of the time in need.
Question 16 of 30

16. Question
When are most of the time basket retention used and which is the purpose of using it?
- Basket retention is used when there are significant property and casualty losses from the same occurrence. The Basket retention limits a ceding company's loss in events involving multiple policies to single retention versus having to pay two retentions.
- Basket retention is used when there are significant property and casualty gains from the same occurrence. The Basket retention limits a ceding company's loss in events involving multiple policies to single retention versus having to pay two retentions.
- Basket retention is used when there are significant property and casualty losses from the same occurrence. The Basket retention limits a ceding company's gain in events involving multiple policies to single retention versus having to pay two retentions.
- Basket retention is used when there are significant property and casualty losses from the same occurrence. The Basket retention limits a ceding company's loss in events involving multiple policies to single retention versus having to pay multiple retentions.
Correct

Incorrect

In the unique situation that the property and faculty losses from the same occurrence, then the basket retention comes in use.
Question 17 of 30

17. Question
Why a company would elect to do a multiple line cover as opposed to separate property and casualty excess treaties?
- More effective and efficient to place, often simpler to administer for the cedent allows for consistency between different terms without limits.
- More effective and efficient to place, often simpler to administer for the cedent allows for consistent terms between property and casualty or premiums and limits.
- More effective and efficient to start, however not easier to administer for the cedent allows for consistent terms between property and casualty or premiums and limits.
- More effective to place, often simpler to administer for the cedent allows for consistent terms between property and casualty without many limits.
Correct

Incorrect

The reason behind a company would choose to do a multiple line cover versus opposed to other variants is that is more effective and efficient.
Question 18 of 30

18. Question
When is basket retention used most of the time and why considering some of these answers?
I. The Basket retention limits a ceding company’s loss in events involving multiple policies to single retention.
II. Basket retention is used when there is significant property.
III. Basket retention is used when there are casualty losses from the same occurrence.
IV. The Basket retention limits a ceding company’s loss in events versus having to pay two retentions.
- I & II
- II Only
- III Only
- All of the above
Correct

Incorrect

There is no single reason when basket retention is useful. In this case, all the variants provided apply and are valid answers.
Question 19 of 30

19. Question
Which party determines the inception of a cat event and which contract provision impact the decision?
- Cedent decision predominantly based on hours limitation but can be impacted by other elements of the occurrence definition.
- Cedent decision predominantly based on hours limitation but can be impacted by other elements defined by the assured person.
- Cedent decision predominantly based on hours limitation but cannot be impacted by other elements of the occurrence definition.
- Cedent decision can be based only on hours limitation but can be impacted by other elements of the occurrence definition.
Correct

Incorrect

The inception of a cat event and the contract provision impacting the decision are predominantly based on hours limitation. In some case, it can be impacted by other elements of the occurrence definition.
Question 20 of 30

20. Question
Which from the below options given is the only correct formula used to determine the Rate of Line?
- Reinsurance Premium/Insurance Layer limit.
- Insurance Premium/Reinsurance Layer limit.
- Insurance Secondary/Reinsurance Layer limit.
- Reinsurance Premium/Reinsurance Layer limit.
Correct

The correct formula used to determine the rate of a line is: Reinsurance Premium/Reinsurance Layer limit.

Incorrect
Question 21 of 30

21. Question
What are some of the elements used to calculate a reinsurance premium under the per occurrence catastrophe contract?
I. Unlimited elements.
II. Time element.
III. Limit being reinstated.
IV. Annual premium.
- I & II
- II & III
- II, III & IV
- None of the above
Correct

Incorrect

The elements used to calculate a reinsurance premium under the per occurrence catastrophe contract are unlimited, time, limit being reinstalled and annual premium.
Question 22 of 30

22. Question
Which is the formula for the loss cost and choose which of the description is correct?
- Loss Cost=ceded incurred loss/subject earned premium. The loss cost represents the % of SEP needed to cover the historical excess incurred losses to the layer.
- Loss Cost=ceded incurred loss/subject earned premium. The loss cost represents the % of SEP needed to uncover the historical excess incurred losses to the layer.
- Loss Cost=ceded incurred loss/subject earned premium. The loss cost represents the % of SEP needed to cover the present excess incurred losses to the layer.
- Loss Cost=ceded incurred loss/subject earned premium. The loss cost represents the % of SEP needed to cover the future excess incurred losses to the layer.
Correct

Incorrect

The formula that best describes the loss cost is: Loss Cost= ceded incurred loss/subject earned premium.
Question 23 of 30

23. Question
How would you define reinsurance commutation considering the below solutions offered?
- A commutation agreement is a reinsurance agreement in which the reinsurer and ceding company agree on the conditions under which all obligations for one part only in the agreement are discharged.
- A commutation agreement is a reinsurance agreement in which the insurer and ceding company agree on the conditions under which all obligations for both parties in the agreement are discharged.
- A commutation agreement is an insurance agreement in which the reinsurer and ceding company agree on the conditions under which all obligations for both parties in the agreement are discharged.
- A commutation agreement is a reinsurance agreement in which the reinsurer and ceding company agree on the conditions under which all obligations for both parties in the agreement are discharged.
Correct

Incorrect

In the reinsurance commutation, the reinsurer and ceding company agree on the conditions under which all obligations for both parties in the agreement are discharged.
Question 24 of 30

24. Question
Which of the below are valid types of insurance, considering the options given?
I. Property insurance.
II. Marine insurance.
III. Fire insurance.
IV. Life insurance.
- I & II
- III Only
- III & IV
- All of the above
Correct

Incorrect

The types of insurance known are property, marine, fire and life.
Question 25 of 30

25. Question
Which of the below definitions can be considered a valid one to explain the excess of loss arguments?
- Excess of loss agreements are non-proportional and provide that the ceding insurer is liable for a predetermined dollar amount of any loss covered by the reinsured insurance contracts.
- Excess of loss agreements are proportional and provide that the ceding insurer is liable for a predetermined dollar amount of any loss covered by the reinsured insurance contracts.
- Excess of loss agreements are non-proportional and provide that the ceding reinsurer is liable for a predetermined dollar amount of any loss covered by the reinsured insurance contracts.
- Excess of loss agreements are non-proportional and provide that the ceding insurer is liable for a determined dollar by any amount covered by the reinsured insurance contracts.
Correct

Incorrect

Excess of loss could be explained as an agreement that provides that the ceding insurer is liable for a predetermined dollar amount of any loss covered by the reinsured insurance contracts.
Question 26 of 30

26. Question
What will prudent insurers do in any given situation considering the options you are given?
I. Will avoid over-exposure in general.
II. Will try to avoid exposure at any risk.
III. Will always only take risks they have experience in.
IV. Only use facultative reinsurance to reinsure business.
- I & II
- II & III
- III & IV
- None of the above
Correct

Incorrect

The prudent insurers will avoid overexpose but also try to avoid any exposed at risk.
Question 27 of 30

27. Question
Which of the statement from the solutions offered about prudent insurers do you consider to be true?
- The prudent insurers will avoid over-exposure on any risk.
- The prudent insurers will always only take risks they have experience in.
- The prudent insurers will focus on profit only.
- The prudent insurers will only use facultative reinsurance to reinsure business.
Correct

Incorrect

The prudent insurers will always try to avoid over-exposure on any risk, when this is of course possible.
Question 28 of 30

28. Question
What do you consider that solvency margin is, considering some of the options given?
- Is the amount by which assets must exceed liabilities.
- Is a tool to use when we are checking if commercial clients are solvent.
- Solvency margin worked out by dividing premium by claims.
- Is a tool to use to check if commercial clients are real.
Correct

Incorrect

Through the solvency margin, we understand to be the amount by which assets must exceed liabilities.
Question 29 of 30

29. Question
Which of the following can best describe in a few words what reinsurance is by definition?
- A risk transfer mechanism and spreads the risk.
- Organised once a year in negotiations with reinsurers.
- A mechanism to transfer high-risk business to another insurer.
- Only necessary when an insurer is new or inexperienced in a class of business.
Correct

Incorrect

Reinsurance by definition is a risk transfer mechanism and spreads the risk.
Question 30 of 30

30. Question
How is surplus reinsurance similar to quota share reinsurance, which is the main similarities?
- The reinsurer and reinsured's share of the claim is proportionate.
- The reinsured retains a more homogeneous portfolio.
- The share of the reinsured and reinsurer differs from cession to cession.
- The reinsurer's share of the claim is a multiple of the reinsured's retention.
Correct

Incorrect

The surplus reinsurance is similar to quota share reinsurance through a share of the claim is proportionate.

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