CAS CAS Property and Casualty Insurance Fundamentals 1

Question 1

Which of the following best describes the principle of indemnity in property and casualty insurance?

Accepted Answer

The insured should be restored to the same financial position as before the loss, no more and no less

Answer

The principle of indemnity states that insurance should restore the insured to their pre-loss financial position without allowing profit from the loss.

Question 2

In US property and casualty insurance, what does 'occurrence basis' coverage mean?

Accepted Answer

Coverage applies to losses that occur during the policy period, regardless of when the claim is filed

Answer

Occurrence basis coverage is triggered by when the loss event happens, not when the claim is reported, which can affect long-tail liability lines.

Question 3

What is the purpose of a deductible in a property and casualty insurance policy?

Accepted Answer

To reduce moral hazard and share risk between insurer and insured

Answer

Deductibles reduce moral hazard by ensuring insureds bear some financial responsibility, which discourages careless behavior and small nuisance claims.

Question 4

Which coverage part of a commercial general liability (CGL) policy covers bodily injury and property damage claims arising from the insured's products?

Accepted Answer

Products-completed operations hazard

Answer

The products-completed operations hazard covers liability arising from the insured's products after they have left the insured's custody and control.

Question 5

What is subrogation in the context of property and casualty insurance?

Accepted Answer

The insurer's right to pursue a third party that caused an insurance loss to the insured

Answer

Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and recover the loss from the negligent third party.

(CAS) Casualty Actuarial Society Practice Test

(CAS) Casualty Actuarial Society Practice Test

CAS CAS Property and Casualty Insurance Fundamentals 1