Question 1

All the following are arguments that surety bonding is not the same as insurance except:

Accepted Answer

A) three parties in the surety bonding contract instead of two for insurance 
B) fraud on the part of the principal does not relieve an insurer of liability under a bond, whereas it does relieve the insurer of liability in an insurance contract 
C) the surety bonding contract is only lending financial backing 
D) both the bonding contract and insurance contract are issued by licensed insurance companies 
A) three parties in the surety bonding contract instead of two for insurance 
B) fraud on the part of the principal does not relieve an insurer of liability under a bond, whereas it does relieve the insurer of liability in an insurance contract 
C) the surety bonding contract is only lending financial backing 
D) both the bonding contract and insurance contract are issued by licensed insurance companies

Question 2

Professional reinsurance companies

Accepted Answer

A) engage only in reinsurance transactions 
B) make up only a small part of the reinsurance market 
C) are located only in the United States 
D) also act as primary insurers 
A) engage only in reinsurance transactions 
B) make up only a small part of the reinsurance market 
C) are located only in the United States 
D) also act as primary insurers

Question 3

Pro-rata reinsurance:

Accepted Answer

A) commits the reinsurer to pay part of a claim, but only after the primary insurer's coverage has been completely exhausted 
B) is distinguished by very high retention amounts 
C) means losses, premiums and expenses are divided proportionately by the primary insurer and the reinsurer 
D) is only sold by alien reinsurers, and then only at very high rates 
A) commits the reinsurer to pay part of a claim, but only after the primary insurer's coverage has been completely exhausted 
B) is distinguished by very high retention amounts 
C) means losses, premiums and expenses are divided proportionately by the primary insurer and the reinsurer 
D) is only sold by alien reinsurers, and then only at very high rates

Question 4

When a primary insurer "cedes" coverage to a reinsurer,the process is called:

Accepted Answer

A) reinsurance 
B) automatic coverage 
C) retrocession 
D) cession 
A) reinsurance 
B) automatic coverage 
C) retrocession 
D) cession

Question 5

United Insurance Company insures Travelco for fire insurance.United reinsures part of the exposure with Promises Reinsurance Company on an excess of loss basis,with Uniteds retention loss level equal to $150,000. In this instance,assuming a $400,000 insured loss,Promises will pay to United:

Accepted Answer

A) $0 
B) $100,000 
C) $150,000 
D) $250,000 
A) $0 
B) $100,000 
C) $150,000 
D) $250,000

Question 6

Pro-rata reinsurance coverage may be either facultative or treaty.

Accepted Answer

A) True 
 B)False

Question 7

Pro-rata reinsurance determines the reinsurers share of losses in a different manner than excess of loss reinsurance.

Accepted Answer

A) True 
 B)False

Question 8

ET Insurance Company cedes to MJ Insurance Company $60,000 of a $100,000 exposure on an excess of loss basis. A loss occurs for $60,000.

Accepted Answer

A) MJ pays $36,000; ET pays $24,000 
B) MJ pays $20,000; ET pays $40,000 
C) MJ pays $40,000, ET pays $20,000 
D) MJ pays $30,000; ET pays $30,000 
A) MJ pays $36,000; ET pays $24,000 
B) MJ pays $20,000; ET pays $40,000 
C) MJ pays $40,000, ET pays $20,000 
D) MJ pays $30,000; ET pays $30,000

Question 9

Pro-rata reinsurance means:

Accepted Answer

A) losses, premiums, and expenses are divided proportionately between the primary insurer and reinsurer 
B) reinsurance is automatic 
C) coverage is available at market rates 
D) reinsurance is layered horizontally after the primary's retention 
A) losses, premiums, and expenses are divided proportionately between the primary insurer and reinsurer 
B) reinsurance is automatic 
C) coverage is available at market rates 
D) reinsurance is layered horizontally after the primary's retention

Question 10

Which of the following is not a valid reason to reinsure an exposure?

Accepted Answer

A) to make insured exposures similar in dollar size 
B) to provide the insured access to Lloyd's of London 
C) to buy services from the reinsurer 
D) to allow agents to be more competitive 
A) to make insured exposures similar in dollar size 
B) to provide the insured access to Lloyd's of London 
C) to buy services from the reinsurer 
D) to allow agents to be more competitive

Question 11

Which of these would be of least interest to a surety when underwriting a contract bond?

Accepted Answer

A) the contractor's financial statements 
B) the contractor's three previous declarations of bankruptcy 
C) the contractor's previous criminal convictions, all for felonies, but unrelated to construction contracting 
D) the employee benefits the contractor provides for its workers 
A) the contractor's financial statements 
B) the contractor's three previous declarations of bankruptcy 
C) the contractor's previous criminal convictions, all for felonies, but unrelated to construction contracting 
D) the employee benefits the contractor provides for its workers

Question 12

Fraud by the principal against the obligee generally voids a surety bond.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a type of reinsurance arrangement?

Accepted Answer

A) facultative reinsurance 
B) treaty reinsurance 
C) pro rata reinsurance 
D) cooperative reinsurance 
A) facultative reinsurance 
B) treaty reinsurance 
C) pro rata reinsurance 
D) cooperative reinsurance

Question 14

The surety is bound to perform,and pay on behalf of the obligee,if the obligee fails to perform as promised.

Accepted Answer

A) True 
 B)False

Question 15

United Insurance Company insures Travelco for fire insurance.United reinsures 40% of this exposure with Promises Reinsurance company on a pro-rata basis. If a $400,000 insured loss occurs at Travelco,Promises Reinsurance will pay United:

Accepted Answer

A) $0 
B) $400,000 
C) $160,000 
D) $240,000 
A) $0 
B) $400,000 
C) $160,000 
D) $240,000

Question 16

What is the difference between the crimes of theft,robbery and burglary?

Accepted Answer

Theft implies the taking of property wit

Question 17

When a reinsurer cedes coverage to another reinsurer,it is called retrocession.

Accepted Answer

A) True 
 B)False

All the following are arguments that surety bonding is not the same as insurance except:

Professional reinsurance companies

Pro-rata reinsurance:

When a primary insurer "cedes" coverage to a reinsurer,the process is called:

United Insurance Company insures Travelco for fire insurance.United reinsures part of the exposure with Promises Reinsurance Company on an excess of loss basis,with Uniteds retention loss level equal to $150,000. In this instance,assuming a $400,000 insured loss,Promises will pay to United:

Pro-rata reinsurance coverage may be either facultative or treaty.

Pro-rata reinsurance determines the reinsurers share of losses in a different manner than excess of loss reinsurance.

ET Insurance Company cedes to MJ Insurance Company $60,000 of a $100,000 exposure on an excess of loss basis. A loss occurs for $60,000.

Pro-rata reinsurance means:

Which of the following is not a valid reason to reinsure an exposure?

Which of these would be of least interest to a surety when underwriting a contract bond?

Fraud by the principal against the obligee generally voids a surety bond.

Which of the following is not a type of reinsurance arrangement?

The surety is bound to perform,and pay on behalf of the obligee,if the obligee fails to perform as promised.

United Insurance Company insures Travelco for fire insurance.United reinsures 40% of this exposure with Promises Reinsurance company on a pro-rata basis. If a $400,000 insured loss occurs at Travelco,Promises Reinsurance will pay United:

What is the difference between the crimes of theft,robbery and burglary?

When a reinsurer cedes coverage to another reinsurer,it is called retrocession.

Fundamentals and Terminology

Defining the Insurable Event

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Insurance Contracts

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Advanced Topics in Risk Management

Commercial Property Insurance

Commercial Liability Insurance

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

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Exam 20: Bonding,Crime Insurance and Reinsurance

All the following are arguments that surety bonding is not the same as insurance except:

Professional reinsurance companies

Pro-rata reinsurance:

When a primary insurer "cedes" coverage to a reinsurer,the process is called:

United Insurance Company insures Travelco for fire insurance.United reinsures part of the exposure with Promises Reinsurance Company on an excess of loss basis,with Uniteds retention loss level equal to $150,000. In this instance,assuming a $400,000 insured loss,Promises will pay to United:

Pro-rata reinsurance coverage may be either facultative or treaty.

Pro-rata reinsurance determines the reinsurers share of losses in a different manner than excess of loss reinsurance.

ET Insurance Company cedes to MJ Insurance Company $60,000 of a $100,000 exposure on an excess of loss basis. A loss occurs for $60,000.

Pro-rata reinsurance means:

Which of the following is not a valid reason to reinsure an exposure?

Which of these would be of least interest to a surety when underwriting a contract bond?

Fraud by the principal against the obligee generally voids a surety bond.

Which of the following is not a type of reinsurance arrangement?

The surety is bound to perform,and pay on behalf of the obligee,if the obligee fails to perform as promised.

United Insurance Company insures Travelco for fire insurance.United reinsures 40% of this exposure with Promises Reinsurance company on a pro-rata basis. If a $400,000 insured loss occurs at Travelco,Promises Reinsurance will pay United:

What is the difference between the crimes of theft,robbery and burglary?

When a reinsurer cedes coverage to another reinsurer,it is called retrocession.

Fundamentals and Terminology

Defining the Insurable Event

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Insurance Contracts

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Advanced Topics in Risk Management

Commercial Property Insurance

Commercial Liability Insurance

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Filters