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Question 1 of 10
1. Question
How does a general insurance company normally disclose accounts to the supervisory authorities?
Correct
A general insurance company normally discloses its financial position through annual accounts and returns, to demonstrate solvency showing that the assets exceed the liabilities. Although for the supervisory authorities, it’s not a matter of the assets exceeding the liabilities but with a specified margin.
Incorrect
A general insurance company normally discloses its financial position through annual accounts and returns, to demonstrate solvency showing that the assets exceed the liabilities. Although for the supervisory authorities, it’s not a matter of the assets exceeding the liabilities but with a specified margin.
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Question 2 of 10
2. Question
Which of these are the factors affecting solvency margin and standards of technical provision?
Correct
Solvency margins have changes in the value of their assets on the adequacy to meet the liabilities due to some of the problems that include adverse run-off of an existing business, poor underwriting experience, and failure to recover from reinsurers, falls in asset values, excessive expenses, mismanagement of the assets.
Incorrect
Solvency margins have changes in the value of their assets on the adequacy to meet the liabilities due to some of the problems that include adverse run-off of an existing business, poor underwriting experience, and failure to recover from reinsurers, falls in asset values, excessive expenses, mismanagement of the assets.
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Question 3 of 10
3. Question
Why is it a rarity for insurance companies to be wound by Court in Solvency requirements than to be a run-off to extinction or to be transferred to another company?
Correct
It is much more normal for companies to be run off to extinction or transferred to another company because a company can carry on writing business only if the supervisory authority declares it meets the solvency requirements. That is why it is a rare fact that the insurance companies wound up by the Court as it lays down different criteria to determine the state of the company than Supervisory authorities.
Incorrect
It is much more normal for companies to be run off to extinction or transferred to another company because a company can carry on writing business only if the supervisory authority declares it meets the solvency requirements. That is why it is a rare fact that the insurance companies wound up by the Court as it lays down different criteria to determine the state of the company than Supervisory authorities.
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Question 4 of 10
4. Question
When the supervisory authorities review any failure of the existing business in maintaining an additional solvency margin, they use the “break-up” basis approach. What, in your knowledge, is meant by the term “break-up” basis?
Correct
When the company does not have sufficient free resources to satisfy the supervisory authority and there is a failure by the company to maintain the outstanding claims, Supervisory authorities will not permit the company to continue writing business, by taking the break-up basis approach that is no further business is written and existing business is run-off to extinction.
Incorrect
When the company does not have sufficient free resources to satisfy the supervisory authority and there is a failure by the company to maintain the outstanding claims, Supervisory authorities will not permit the company to continue writing business, by taking the break-up basis approach that is no further business is written and existing business is run-off to extinction.
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Question 5 of 10
5. Question
What are the two-stages of the solvency margin trigger adopted by the European Economic Community?
Correct
A two-stage solvency margin trigger has been adopted by the EEC, which includes the higher-level known as the required solvency margin and the lower level referred to as the guarantee fund. The guarantee fund is set at one-third of the solvency margin. When the company fails to maintain the guarantee fund, immediate action to inject additional capital required is put up in order to avert the withdrawal of authorization.
Incorrect
A two-stage solvency margin trigger has been adopted by the EEC, which includes the higher-level known as the required solvency margin and the lower level referred to as the guarantee fund. The guarantee fund is set at one-third of the solvency margin. When the company fails to maintain the guarantee fund, immediate action to inject additional capital required is put up in order to avert the withdrawal of authorization.
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Question 6 of 10
6. Question
Which of the following aspects help solve the common problems of the uncertainty of the strength of the technical provisions?
Correct
The fundamental weakness is that the assets and the liabilities are not being valued on a consistent basis and variability is not taken into account. Furthermore, to help solve the problem of the uncertainty to the strength of the technical provisions, the reserving standards should be clearly defined and the disclosure of the basis for the provisions should be done. Technical provisions should not be overestimated as it could affect future profitability.
Incorrect
The fundamental weakness is that the assets and the liabilities are not being valued on a consistent basis and variability is not taken into account. Furthermore, to help solve the problem of the uncertainty to the strength of the technical provisions, the reserving standards should be clearly defined and the disclosure of the basis for the provisions should be done. Technical provisions should not be overestimated as it could affect future profitability.
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Question 7 of 10
7. Question
An emerging cost is carried out on the totality of the assets and liabilities of the company, which can be done by using simulation. What according to your understanding is a simulation?
Correct
The deterministic values for the liabilities and assets are not sufficient due to the uncertainties of general insurance and variability needs to be induced. All items are treated as random variables to handle emerging costs. A picture of the likely pattern of development can be obtained by examining a large number of simulations.
Incorrect
The deterministic values for the liabilities and assets are not sufficient due to the uncertainties of general insurance and variability needs to be induced. All items are treated as random variables to handle emerging costs. A picture of the likely pattern of development can be obtained by examining a large number of simulations.
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Question 8 of 10
8. Question
The complexity of the underlying risk process can be approached by using the Poisson process, to treat the basic claims and build on a series of structure variables. Which one of these gets included in the list of the variables to calculate the risk?
Correct
A practical expedient in view of the complexity of the underlying risk process is to treat the basic claims process as a Poisson process and then build on a series of “structure variables” to take account of which includes trends of claims frequency, long term variations in premium rate adequacy, year to year fluctuations in mean claims frequency. Then further assumptions need to be made about the claims size distribution.
Incorrect
A practical expedient in view of the complexity of the underlying risk process is to treat the basic claims process as a Poisson process and then build on a series of “structure variables” to take account of which includes trends of claims frequency, long term variations in premium rate adequacy, year to year fluctuations in mean claims frequency. Then further assumptions need to be made about the claims size distribution.
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Question 9 of 10
9. Question
How does a future premium gets generated for a general insurance company?
Correct
The written premiums are to be net of commission and initial expenses. Any business company although having an existing portfolio of business generates a pattern of premium growth and different growth rate assumptions may be made for the future. That is why Future premiums are generated from an assumed initial premium level and assumed annual growth rate that is real.
Incorrect
The written premiums are to be net of commission and initial expenses. Any business company although having an existing portfolio of business generates a pattern of premium growth and different growth rate assumptions may be made for the future. That is why Future premiums are generated from an assumed initial premium level and assumed annual growth rate that is real.
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Question 10 of 10
10. Question
The asset margin is expressed as a percentage of the net written premiums recorded in the last year, before the date of the assessment. What is the percentage range with its normal value?
Correct
The asset margin is a percentage that ranges from nil to 120%, in order to calculate the outstanding claims, allowing for inflation and for discounting. The normal value is taken as 40%.
Incorrect
The asset margin is a percentage that ranges from nil to 120%, in order to calculate the outstanding claims, allowing for inflation and for discounting. The normal value is taken as 40%.