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 is 'catastrophe reinsurance' and why do primary insurers purchase it?
Answer: Treaty reinsurance that protects against accumulation of losses from a single event like a hurricane, limiting the primary insurer's net exposure
Catastrophe reinsurance protects primary insurers from correlated large-scale loss events where many policies are triggered simultaneously, preventing insolvency.
What is 'moral hazard' in property and casualty insurance?
Answer: The tendency of insurance coverage to reduce an insured's incentive to prevent losses or exaggerate claims
Moral hazard arises because once insured, individuals may be less careful about loss prevention or may inflate claims, since the insurer bears the financial consequence.
In US auto insurance, what does 'uninsured motorist' (UM) coverage protect against?
Answer: Bodily injury to the insured caused by a driver who has no liability insurance
UM coverage pays for the insured's bodily injuries when the at-fault driver carries no liability insurance, stepping in where the tortfeasor's policy is absent.
What is an 'umbrella' liability policy in the US personal lines market?
Answer: A policy that provides excess liability coverage above the limits of underlying auto and homeowners policies
Personal umbrella policies sit above underlying homeowners and auto liability limits, providing broad excess coverage for catastrophic liability claims.
What is 'adverse selection' in the context of property and casualty insurance underwriting?
Answer: The tendency for higher-risk individuals to be more likely to seek insurance, skewing the insured pool toward worse-than-average risks
Adverse selection occurs because individuals with higher loss probability are more motivated to buy insurance, which can make insurer pricing inadequate if not addressed through underwriting.
What does 'homeowners HO-3' form cover in the US personal lines market?
Answer: The dwelling on an open-perils basis and personal property on a named-perils basis
The HO-3 special form covers the dwelling and other structures on an all-risk (open-perils) basis while personal property is covered on a named-perils basis, making it the most popular homeowners form.