CAS Reinsurance Concepts and Applications 2

Question 1

In excess of loss reinsurance, what is the term for the amount the ceding company pays before the reinsurer's coverage begins?

Accepted Answer

Attachment point (retention)

Answer

Cession

Answer

Burning cost

Answer

Treaty limit

Question 2

Which reinsurance pricing method calculates the reinsurer's expected loss cost based on historical loss experience adjusted for trend and development?

Accepted Answer

Experience rating (burning cost method)

Answer

Exposure rating

Answer

Payback period method

Answer

Index-linked pricing

Question 3

What does the term 'reinsurance recoverable' represent on a primary insurer's balance sheet?

Accepted Answer

Amounts owed to the primary insurer by reinsurers for ceded losses

Answer

The maximum limit of reinsurance coverage purchased

Answer

The unearned premium reserve transferred to reinsurers

Answer

The profit commission earned by the ceding company

Question 4

In surplus share reinsurance, the amount ceded is based on which factor?

Accepted Answer

The amount by which the policy limit exceeds the ceding company's retention line

Answer

A fixed percentage applied to all policies

Answer

The aggregate losses of the portfolio for the year

Answer

The individual loss amounts as they occur

Question 5

What is a 'loss corridor' in an aggregate reinsurance structure?

Accepted Answer

A range of aggregate losses where the ceding company retains 100% of losses

Answer

The geographic area covered by catastrophe reinsurance

Answer

The time window during which losses can be reported to the reinsurer

Answer

A buffer between the primary attachment point and reinsurance limit

Question 6

Under the 'follow the fortunes' doctrine in reinsurance, what obligation does the reinsurer have?

Accepted Answer

To pay its share of losses as long as the ceding company settled them in good faith

Answer

To follow the investment strategy of the ceding company

Answer

To adjust its pricing annually based on the ceding company's profits

Answer

To provide coverage only when the primary policy is also paying

Question 7

Which term describes reinsurance purchased to protect a specific layer of losses, from one attachment point up to a higher limit, without regard to individual risk?

Accepted Answer

Per occurrence excess of loss layer

Answer

Quota share layer

Answer

Facultative certificate

Answer

Aggregate treaty band