BCP - Basic Insurance Concepts and Principles Singapore Reinsurance and Co-insurance Questions and Answers

Question 1

An insurer in Singapore underwrites a policy for a large, complex industrial risk.
To better manage its own financial exposure and solvency margin, the insurer transfers a portion of this risk to another insurance company.
What is this practice called?

Accepted Answer

Reinsurance

Answer

Co-insurance

Answer

Subrogation

Answer

Assignment

Question 2

A consortium of three Singaporean insurers agrees to underwrite the S$200 million property risk for a new commercial building. Insurer A accepts 50%, Insurer B accepts 30%, and Insurer C accepts 20%. If a valid claim of S$10 million arises from a fire, how much is Insurer C legally obligated to pay the policyholder?

Accepted Answer

S$2 million, based on its agreed share.

Answer

S$10 million, after which it claims contributions from A and B.

Answer

S$3.33 million, as the loss is divided equally.

Answer

Nothing, as the lead insurer (Insurer A) is solely responsible for payment.

Question 3

An underwriter at a Singapore-based insurance company is presented with a unique, high-value risk that is not covered under its existing automatic reinsurance agreements. The underwriter needs to secure reinsurance for this specific risk on a case-by-case basis. Which type of reinsurance should be sought?

Accepted Answer

Facultative Reinsurance

Answer

Treaty Reinsurance

Answer

Retrocession

Answer

Surplus Share Reinsurance

Question 4

A policyholder, SG Enterprises, has a fire insurance policy with Insurer X. Unknown to SG Enterprises, Insurer X has reinsured 40% of the risk with Reinsurer Y. Following a major fire, SG Enterprises submits a claim. What is the correct procedure for the claim?

Accepted Answer

SG Enterprises must claim the full amount from Insurer X.

Answer

SG Enterprises must claim 60% from Insurer X and 40% directly from Reinsurer Y.

Answer

SG Enterprises must claim the full amount from Reinsurer Y.

Answer

SG Enterprises must submit the claim to the General Insurance Association (GIA) to apportion the loss.

Question 5

Which of the following is a primary distinction between co-insurance and reinsurance in the Singapore insurance market?

Accepted Answer

In co-insurance, the policyholder is aware of all participating insurers, whereas in reinsurance, the policyholder typically only deals with the direct insurer.

Answer

Reinsurance involves multiple insurers sharing a risk from inception under a single policy, while co-insurance is insurance for an insurer.

Answer

Co-insurance is mandatory under the Insurance Act for risks over S$100 million, while reinsurance is optional.

Answer

Reinsurance is handled by the Singapore Reinsurers' Association, while co-insurance is exclusively managed by the General Insurance Association (GIA).

Question 6

In a large co-insurance arrangement for a major infrastructure project in Singapore, one insurer is designated as the 'lead insurer'. What is the primary function of this lead insurer?

Accepted Answer

To handle administration, issue policy documents, and manage claims on behalf of the co-insuring group.

Answer

To assume 100% of the risk and then reinsure it with the other co-insurers.

Answer

To act as the sole regulatory contact with the Monetary Authority of Singapore (MAS) for the group.

Answer

To guarantee the payments of any co-insurer that might default on a claim.