CAS Property and Casualty Insurance Fundamentals Flashcards
6 cards from real CAS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CAS Property and Casualty Insurance Fundamentals flashcards as text
What distinguishes surplus lines insurance from admitted insurance in the US?
Answer: Surplus lines insurers are not licensed in the state but may write risks that admitted carriers decline
Surplus lines insurers operate outside normal state licensing requirements and state guaranty fund protection, filling coverage gaps for risks that admitted carriers won't write.
What is a 'combined ratio' in property and casualty insurance?
Answer: The sum of the loss ratio and the expense ratio, indicating overall underwriting profitability
A combined ratio below 100% indicates underwriting profit; above 100% indicates an underwriting loss, though investment income may still make the line profitable overall.
Which of the following is an example of a 'long-tail' line of business in casualty insurance?
Answer: Medical malpractice liability
Medical malpractice is a long-tail line because claims can be reported and settled many years after the policy period ends, creating significant reserving uncertainty.
What does 'adverse development' mean in the context of loss reserves?
Answer: Actual losses emerging higher than previously estimated reserves
Adverse development occurs when actual claim payments and emerging losses exceed the amounts previously set aside as reserves, requiring reserve strengthening.
In commercial property insurance, what does 'business interruption' coverage provide?
Answer: Replacement of lost income and continuing expenses when a covered peril forces a business to suspend operations
Business interruption insurance covers the income a business would have earned and necessary continuing expenses during the period of restoration after a covered property loss.
What is the 'law of large numbers' and why is it fundamental to insurance?
Answer: As the number of similar exposure units increases, actual loss experience approaches the expected (average) loss rate
The law of large numbers allows insurers to predict losses with greater accuracy over large pools of similar risks, making the business of insurance mathematically feasible.