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Question 1 of 10
1. Question
Stop Loss Reinsurance is the type of cover that tends to be expensive and difficult to obtain, in which area it is the rather common policy?
Correct
The purpose of Stop Loss Reinsurance is to limit the losses of the reinsured in a given year, across different types of causes, or different events, or even different classes of insurance. It compensates the reinsured whenever the loss ratio for one or more classes of a business exceeds a given percentage, up to a given limit percentage. The cover might be based on a monetary amount.
Incorrect
The purpose of Stop Loss Reinsurance is to limit the losses of the reinsured in a given year, across different types of causes, or different events, or even different classes of insurance. It compensates the reinsured whenever the loss ratio for one or more classes of a business exceeds a given percentage, up to a given limit percentage. The cover might be based on a monetary amount.
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Question 2 of 10
2. Question
What according to you is the main advantage of the Quota share reinsurance?
Correct
It is said to be such a share in which the claims and premiums, both are proportionally shared between the insurer and the reinsurer, and the proportion is counted as constant across all risks. The premium is rather split in the proportion of 30% to 70% between the insurer and the reinsurer and all claims would also get split according to that proportion. The great feature quota share reinsurance provides is that it allows the insurer to share its risk and improve its solvency ratio.
Incorrect
It is said to be such a share in which the claims and premiums, both are proportionally shared between the insurer and the reinsurer, and the proportion is counted as constant across all risks. The premium is rather split in the proportion of 30% to 70% between the insurer and the reinsurer and all claims would also get split according to that proportion. The great feature quota share reinsurance provides is that it allows the insurer to share its risk and improve its solvency ratio.
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Question 3 of 10
3. Question
Which out of these is the disadvantage of the quota share reinsurance?
Correct
The disadvantage of quota share reinsurance is that the same percentage of the risk is shared between insurer and reinsurer regardless of the risk size. The very small risks that may sit comfortably in the insurer’s portfolio are shared with the reinsurer, whereas risks that are way too large for the insurer may still be too large after they are shared.
Incorrect
The disadvantage of quota share reinsurance is that the same percentage of the risk is shared between insurer and reinsurer regardless of the risk size. The very small risks that may sit comfortably in the insurer’s portfolio are shared with the reinsurer, whereas risks that are way too large for the insurer may still be too large after they are shared.
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Question 4 of 10
4. Question
Which type of reinsurance addresses the disadvantages caused by the quota share reinsurance?
Correct
Surplus reinsurance addresses this by making it possible for the proportion of risk retained by the insurer to vary within certain parameters so that the ceded proportion can be higher for larger risks and smaller for smaller risks.
Incorrect
Surplus reinsurance addresses this by making it possible for the proportion of risk retained by the insurer to vary within certain parameters so that the ceded proportion can be higher for larger risks and smaller for smaller risks.
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Question 5 of 10
5. Question
Who is known as an underwriter in an insurance setup?
Correct
A wealthy individual who is willing to take on the risk and put his signature at the bottom of the insurance contract is named as the ‘underwriter’.
Incorrect
A wealthy individual who is willing to take on the risk and put his signature at the bottom of the insurance contract is named as the ‘underwriter’.
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Question 6 of 10
6. Question
Which one of the following is true about Lloyd’s of London?
Correct
In the past, when the individual joined the market, it was provided on an unlimited liability basis. After that, the new members are not allowed to join on an unlimited liability basis but it is made possible to join as an individual on a ‘limited liability partnership’ basis. Members who had joined before the policy are also permitted to convert from the status of unlimited liability status to the limited liability status partnership.
Incorrect
In the past, when the individual joined the market, it was provided on an unlimited liability basis. After that, the new members are not allowed to join on an unlimited liability basis but it is made possible to join as an individual on a ‘limited liability partnership’ basis. Members who had joined before the policy are also permitted to convert from the status of unlimited liability status to the limited liability status partnership.
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Question 7 of 10
7. Question
Which of the reasons are correct for the usage of the captive?
Correct
The reasons why captives are used is a contemplative list, which is as follows: Risk management and lower insurance spend, Access to reinsurance, Unavailability of cover, Risk control, Lighter regulatory burden, etc.
Incorrect
The reasons why captives are used is a contemplative list, which is as follows: Risk management and lower insurance spend, Access to reinsurance, Unavailability of cover, Risk control, Lighter regulatory burden, etc.
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Question 8 of 10
8. Question
How volatility is transferred in a typical commercial insurance situation?
Correct
The smallest losses are borne by the individual business units of a company, then they are passed to the captive that is an in-house insurer owned by the group, and the largest losses are ceded to the insurance market, and the very largest are ceded to the reinsurers. Each layer in the hierarchy holds as much volatility as it is comfortable with which is known as the ‘risk appetite’.
Incorrect
The smallest losses are borne by the individual business units of a company, then they are passed to the captive that is an in-house insurer owned by the group, and the largest losses are ceded to the insurance market, and the very largest are ceded to the reinsurers. Each layer in the hierarchy holds as much volatility as it is comfortable with which is known as the ‘risk appetite’.
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Question 9 of 10
9. Question
What is the job of a broker in the insurance profile?
Correct
Brokers are required to act in the client’s best interest, not the insurer’s or their own. They have the authority to carry out negotiations and after consulting with the client, purchase the insurance on their behalf, without the client contacting the insurer directly.
Incorrect
Brokers are required to act in the client’s best interest, not the insurer’s or their own. They have the authority to carry out negotiations and after consulting with the client, purchase the insurance on their behalf, without the client contacting the insurer directly.
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Question 10 of 10
10. Question
What is the difference between the tied agent and the broker?
Correct
Tied agents are tied to a specific carrier and are authorized to transact business only on its behalf. When a customer goes to a tied agent, that customer has already decided which insurer to deal with, because the insurer holds full responsibility for the actions of the tied agent. On the other hand, brokers act in the client’s best interest, not the insurer’s or their own.
Incorrect
Tied agents are tied to a specific carrier and are authorized to transact business only on its behalf. When a customer goes to a tied agent, that customer has already decided which insurer to deal with, because the insurer holds full responsibility for the actions of the tied agent. On the other hand, brokers act in the client’s best interest, not the insurer’s or their own.