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Tagged of M97 Reinsurance

Quiz by Nicholas Higham

General
M97 Reinsurance
The Chartered Insurance Institute

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50 questions
Show answers
  • Q1
    The main reason an insurer would purchase reinsurance is because
    it delegates all underwriting decisions to the reinsurer.
    it allows risks to be underwritten that could be unprofitable.
    regulations always require facultative reinsurance to be obtained.
    it allows risks to be spread reducing the impact of potential losses.
    30s
    1.1
  • Q2
    Reinsurance pools are comprised of reinsurers that
    accept the same percentage participation on each layer of a reinsurance programme.
    accept the same financial limit on each layer of a reinsurance programme.
    accept a predetermined percentage of all qualifying treaties.
    are obliged to always accept the same financial limit of every qualifying treaty.
    30s
    1.2
  • Q3
    In addition to fund contributions, what monies are the operator of a Retakaful reinsurer entitled to receive?
    A share of the investment income only.
    A commission.
    A fee and a share of the investment income.
    A fee only.
    30s
    1.2
  • Q4
    How does Lloyd’s assist in the management of the underwriting cycle for syndicate reinsurers?
    The Council of Lloyd’s will use the central fund to support reinsurers struggling in a soft market.
    The Lloyd’s Market Association helps reinsurers in a soft market by conducting market-wide marketing campaigns.
    The Franchise Board sets minimum standards for Lloyd’s brokers which prevent significantly sub-standard risks being introduced into the market.
    The Performance Directorate sets risk management and profitability targets to ensure underwriting quality remains high at all times.
    30s
    1.2
  • Q5
    Which type of treaty has been written?
    Question Image
    Excess of loss.
    Surplus.
    Stop loss.
    Quota share.
    30s
    2.1
  • Q6
    Reinsurers X and Y are frequently co-reinsurers on the same liability excess of loss treaties. What is the most likely reason that reinsurer X would NOT want to write a liability quota share retrocession for reinsurer Y?
    It cannot retrocede the cession.
    It would be in breach of Terms of Business Agreements.
    Its exposure to any one single claim could be significantly increased.
    There would be a conflict of interest.
    30s
    2.2
  • Q7
    The disadvantage to an insurer of purchasing a catastrophe bond is that
    it always restricts coverage to a single peril.
    interest payable is always below normal market investment returns.
    geographical restrictions may apply to the cover.
    premiums are always greater than for conventional reinsurance.
    30s
    2.3
  • Q8
    Which type of reinsurance is most likely to charge the total premium at contract inception?
    Facultative.
    Surplus.
    Quota share.
    Stop loss.
    30s
    3.1
  • Q9
    The premium on an original risk is 0.2% of the £15,000,000 original sum insured. An insurer accepts a 50% participation and has a 60% proportional facultative reinsurance. What will be the facultative reinsurance premium?
    £18,000
    £6,000
    £15,000
    £9,000
    30s
    3.2
  • Q10
    A cedant has a 10-line surplus treaty which is subject to a maximum cession of £1,000,000. What is the maximum gross capacity of the cedant, for a single risk, if no other reinsurance coverage is in force?
    £11,000,000
    £10,000,000
    £1,000,000
    £1,100,000
    30s
    4.1
  • Q11
    An original policy incepted on 14 May is reinsured under a quota share reinsurance treaty incepting 1 January. The premium payable to the reinsurer for the original risk is £125,000. The treaty is accounted on a clean-cut basis using the twenty-fourths method. What will be the outgoing portfolio amount for this original policy at 31 December?
    £83,333.33
    £78,125.00
    £41,666.67
    £46,875.00
    30s
    4.2
  • Q12
    A surplus treaty usually attracts a lower commission rate than a quota share treaty because a surplus treaty
    has a higher brokerage rate.
    is always easier to administer.
    can have the profit impacted by the cedant’s application of its tables of limits.
    is more likely to be cancelled mid-term.
    30s
    4.3
  • Q13
    A quota share reinsurance treaty has a flat-rate commission of 10% and a fixed-rate profit commission of 15%. The premium is £150,000. In its first year, the treaty makes a loss. How much combined commission, if any, will be payable by the reinsurer?
    Nil.
    £22,250
    £15,000
    £7,500
    30s
    4.3
  • Q14
    A surplus treaty states that the interest payable to the reinsurer is based on the amount of the reserve held. This confirms the existence of
    a cession limit.
    a premium reserve deposit.
    an event limit.
    a premium portfolio transfer.
    30s
    4.4
  • Q15
    A reinsurer may request a letter of credit on behalf of a reinsured to
    satisfy the requirements of a loss reserve clause.
    prove that a reinsurance claim has been fully settled.
    demonstrate financial security to a rating agency.
    assess the suitability of a potential insured.
    30s
    4.4

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