Reinsurance is a risk management tool used in the insurance industry, where one insurance company (the ceding company) transfers a portion of its risk exposure to another insurer (the reinsurer). This arrangement allows the ceding company to reduce its potential losses from large claims, stabilize its financial performance, and underwrite more policies by sharing risks. Common types include treaty reinsurance, which covers a predefined portfolio of policies, and facultative reinsurance, which is negotiated for specific individual risks. By doing so, reinsurance enhances the overall stability of the insurance market and helps reinsurers diversify their portfolios.
Table of contents
- Part 1: Best AI quiz making software for creating a Reinsurance quiz
- Part 2: 20 Reinsurance quiz questions & answers
- Part 3: AI Question Generator – Automatically create questions for your next assessment
Part 1: Best AI quiz making software for creating a Reinsurance quiz
Nowadays more and more people create Reinsurance quizzes using AI technologies, OnlineExamMaker a powerful AI-based quiz making tool that can save you time and efforts. The software makes it simple to design and launch interactive quizzes, assessments, and surveys. With the Question Editor, you can create multiple-choice, open-ended, matching, sequencing and many other types of questions for your tests, exams and inventories. You are allowed to enhance quizzes with multimedia elements like images, audio, and video to make them more interactive and visually appealing.
Take a product tour of OnlineExamMaker:
● Create a question pool through the question bank and specify how many questions you want to be randomly selected among these questions.
● Build and store questions in a centralized portal, tagged by categories and keywords for easy reuse and organization.
● Simply copy a few lines of codes, and add them to a web page, you can present your online quiz in your website, blog, or landing page.
● Randomize questions or change the order of questions to ensure exam takers don’t get the same set of questions each time.
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Part 2: 20 Reinsurance quiz questions & answers
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1. What is the primary purpose of reinsurance?
A. To increase the insurer’s direct premiums
B. To transfer part of the risk from the insurer to another party
C. To eliminate all risks for the insurer
D. To handle claims directly for policyholders
Answer: B
Explanation: Reinsurance allows insurers to transfer a portion of their risk to reinsurers, helping them manage large losses and maintain financial stability.
2. Which type of reinsurance covers a single risk or a specific policy?
A. Treaty reinsurance
B. Facultative reinsurance
C. Excess of loss reinsurance
D. Quota share reinsurance
Answer: B
Explanation: Facultative reinsurance is arranged for individual risks, allowing the reinsurer to accept or decline each one based on its own assessment.
3. In proportional reinsurance, what does the reinsurer typically receive?
A. Only the premiums
B. A share of the premiums and losses
C. Full control of claims
D. No share of the risks
Answer: B
Explanation: In proportional reinsurance, the reinsurer shares a proportional part of both the premiums and the losses with the ceding company.
4. What is a retention limit in reinsurance?
A. The maximum amount the reinsurer will pay
B. The amount the insurer keeps for itself before reinsurance applies
C. The total premium charged by the reinsurer
D. The minimum loss threshold for claims
Answer: B
Explanation: The retention limit is the portion of risk that the ceding insurer retains, with any excess passed to the reinsurer.
5. Which reinsurance treaty automatically covers all policies issued by the ceding company?
A. Facultative obligatory treaty
B. Surplus treaty
C. Treaty reinsurance
D. Excess of loss treaty
Answer: C
Explanation: Treaty reinsurance agreements cover all risks that fall under the treaty’s terms, without the need for case-by-case negotiation.
6. What does “ceding company” refer to in reinsurance?
A. The company that buys reinsurance
B. The reinsurer providing coverage
C. A third-party broker
D. The policyholder
Answer: A
Explanation: The ceding company is the original insurer that transfers part of its risk to a reinsurer through a reinsurance agreement.
7. In non-proportional reinsurance, when does the reinsurer’s liability begin?
A. From the first dollar of loss
B. Only after the insurer’s retention is exceeded
C. Proportional to the premium paid
D. At the end of the policy period
Answer: B
Explanation: Non-proportional reinsurance, such as excess of loss, only activates once the ceding company’s retention limit is surpassed.
8. What is the main advantage of catastrophe reinsurance?
A. It covers everyday small claims
B. It protects against large-scale disasters
C. It guarantees profit for the insurer
D. It eliminates the need for reserves
Answer: B
Explanation: Catastrophe reinsurance is designed to cover massive losses from events like earthquakes or hurricanes, helping insurers manage extreme risks.
9. How does quota share reinsurance work?
A. The reinsurer covers losses above a certain limit
B. Both parties share premiums and losses in a fixed proportion
C. It only applies to specific policies
D. The insurer retains all risks below a threshold
Answer: B
Explanation: In quota share, the ceding company and reinsurer agree to a percentage split, where the reinsurer takes a fixed share of every risk.
10. What role does a reinsurance broker play?
A. To underwrite policies directly
B. To facilitate agreements between ceding companies and reinsurers
C. To handle all claims processing
D. To invest reinsurance premiums
Answer: B
Explanation: Reinsurance brokers act as intermediaries, helping negotiate and place reinsurance contracts on behalf of insurers.
11. Which factor primarily influences reinsurance pricing?
A. The reinsurer’s marketing budget
B. The historical loss experience and risk profile
C. The policyholder’s age
D. The currency exchange rates
Answer: B
Explanation: Pricing is based on factors like past claims data, potential future risks, and the overall portfolio of the ceding company.
12. What is “reinsurance cession”?
A. The process of rejecting a reinsurance offer
B. The transfer of risk from the insurer to the reinsurer
C. The reinsurer’s decision to cancel a policy
D. A method of direct insurance sales
Answer: B
Explanation: Cession refers to the part of the risk that the ceding company passes on to the reinsurer.
13. In excess of loss reinsurance, what is the “attachment point”?
A. The point where the reinsurer’s coverage begins
B. The total premium amount
C. The insurer’s retention limit
D. The maximum payout cap
Answer: C
Explanation: The attachment point is the threshold (retention limit) at which the reinsurer starts covering losses.
14. Why might an insurer use surplus reinsurance?
A. To cover risks that exceed their underwriting capacity
B. To avoid all financial responsibilities
C. To focus only on small policies
D. To increase administrative costs
Answer: A
Explanation: Surplus reinsurance helps insurers handle risks larger than their retention limits by ceding the excess to reinsurers.
15. What is the difference between proportional and non-proportional reinsurance?
A. Proportional involves sharing, while non-proportional is triggered by excess losses
B. Proportional covers only claims, not premiums
C. Non-proportional is always cheaper
D. There is no difference
Answer: A
Explanation: Proportional reinsurance shares risks proportionally, whereas non-proportional reinsurance only pays out after a specific loss threshold.
16. How does reinsurance affect an insurer’s solvency?
A. It has no impact on solvency ratios
B. It can improve solvency by reducing the insurer’s net risk exposure
C. It always decreases solvency margins
D. It only affects cash flow, not solvency
Answer: B
Explanation: By transferring risk, reinsurance helps insurers maintain adequate capital and meet regulatory solvency requirements.
17. What is a “reinsurance treaty”?
A. A one-time agreement for a single policy
B. A long-term contract covering a class of business
C. A verbal agreement between parties
D. An insurance policy for reinsurers
Answer: B
Explanation: A reinsurance treaty is a standing agreement that automatically applies to predefined types of policies over a period.
18. In facultative reinsurance, who decides if the risk is acceptable?
A. The ceding company alone
B. The policyholder
C. The reinsurer, on a case-by-case basis
D. A regulatory body
Answer: C
Explanation: The reinsurer evaluates and decides whether to accept each individual risk in facultative reinsurance.
19. What is the typical outcome if a reinsurer becomes insolvent?
A. The ceding company assumes full liability
B. Claims are covered by government funds
C. Reinsurance contracts may include protections like collateral
D. Policies are automatically canceled
Answer: A
Explanation: If a reinsurer fails, the ceding company is often left to cover the risks, highlighting the importance of reinsurer financial stability.
20. How does reinsurance contribute to the insurance market?
A. By limiting competition among insurers
B. By increasing the capacity to underwrite larger risks globally
C. By replacing direct insurance entirely
D. By focusing only on high-risk policies
Answer: B
Explanation: Reinsurance enhances the overall market by allowing insurers to take on more business and spread risks internationally.
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Part 3: AI Question Generator – Automatically create questions for your next assessment
Automatically generate questions using AI