Exam 6: Insurance Company Operations

Pac-Coast Insurance (PCI)concentrates its underwriting activities in California.The company is concerned that if a catastrophic earthquake occurs,it might threaten the solvency of the company.To address this risk,PCI issued some debt securities.If a catastrophic earthquake occurs,PCI does not have to repay the full amount borrowed or pay interest.The securities PCI issued are called

Morgan was hired by an insurance company after she graduated from college.Upon completion of a training program,Morgan was assigned to a territory where she adjusts claims of the insurer's policyowners.Morgan is a(n)

All of the following statements about the settlement of a claim are true EXCEPT

A group of small insurance companies joined together so that they could jointly provide reinsurance on larger risks.This organization of insurers formed to provide the capacity needed to reinsure larger risks is called a

The primary function of an actuary is to

Functions of an insurance company's legal department include which of the following? I.Lobbying for legislation favorable to the insurance industry. II.Drafting policy provisions.

The process of transferring risk to the capital markets through the use of financial instruments such as bonds,futures contracts,and options is known as

State insurance regulators require LMN Life Insurance Company to maintain a separate account.The assets in the separate account would support the liabilities for which of the following products?

Antonio is a claims adjuster for LMN Insurance Company.After the insurer is notified that there has been a loss,Antonio meets with the insured.The first step in the claims process that Antonio should follow is to

Jonathan purchased a homeowners policy from Alpha Insurance Company.As Alpha was concerned about a high level of homeowners claims,it purchased excess-of-loss reinsurance with Beta Reinsurance.Beta agreed to pay all homeowners claims in excess of $10 million.Which of the following statements is true?

Granite Insurance Company entered into a treaty reinsurance agreement with Rock Solid Reinsurance (RSR).Granite's retention limit is $400,000 and RSR agreed to provide reinsurance for up to $2.0 million.If Granite writes an $800,000 policy,RSR is responsible for 50 percent of the losses.If Granite insures a $1.6 million risk,RSR is responsible for 75 percent of any losses.What type of reinsurance arrangement did Granite enter into with RSR?

New Liability Insurance Company began operations last year and has been very successful.The company's ability to grow is being restricted by an accounting rule that requires insurers to realize acquisition expenses immediately,while not realizing premiums received as income until some time has passed.Reinsurance is often used in such cases for which of the following purposes?

Which of the following statements is (are)true about life insurance company investments? I.The majority of life insurance company general account assets are invested in bonds. II.The majority of life insurance company separate account assets are invested in stocks.

ABC Insurance Company entered into a reinsurance agreement with XYZ Reinsurance.Under the contract,XYZ Re has no liability unless ABC's loss ratio exceeds 85 percent for the year.XYZ Re agreed to pay all losses in excess of the 85 percent loss ratio.ABC Insurance Company is using reinsurance to

All of the following statements about life insurance company investments are true EXCEPT

Insurers obtain data that can be used to determine rates from

Easy Pay Insurance Company may require insureds who suffer a loss to submit a sworn statement to substantiate that a loss occurred and to describe the conditions under which the loss occurred.This sworn statement is called a(n)

Which of the following statements about reinsurance is true?

Which of the following statements about claim settlement is (are)true? I.The fair payment of claims requires an insurer to adopt a very liberal claims policy. II.To prevent lawsuits,an insurer should provide no personal assistance to a claimant other than that which is required by contractual obligations.

Amy heads the legal staff of a large property and liability insurance company.Amy's staff is likely involved in which of the following activities?