CIA CIA Insurance Market Analysis & Pricing 2

Question 1

A CIA appraiser reviewing a commercial property portfolio notices increasing loss trends in a specific region. This information is most useful for:

Accepted Answer

Informing underwriting and pricing decisions for future policies in that region

Answer

Regional loss trend analysis informs actuarial and underwriting decisions about rate adequacy and risk selection for future policy pricing in that area.

Question 2

What is the primary purpose of reinsurance in the insurance market?

Accepted Answer

To allow primary insurers to transfer a portion of risk, protecting their capital and stabilizing results

Answer

Reinsurance allows primary insurers to cede a portion of their risk to reinsurers, protecting their surplus from large or catastrophic losses and enabling them to write more business.

Question 3

In pricing commercial property insurance, 'rate adequacy' means:

Accepted Answer

Premiums are sufficient to cover expected losses, expenses, and provide a reasonable profit

Answer

Rate adequacy means the charged premium is sufficient to cover the expected losses plus expenses and provide a reasonable profit margin, ensuring the insurer remains solvent.

Question 4

Which of the following best describes a 'monoline' insurer?

Accepted Answer

An insurer writing only one line of insurance, such as property only

Answer

A monoline insurer specializes in and writes only one line of insurance, such as property, title, or mortgage insurance, as opposed to a multi-line insurer.

Question 5

When a CIA appraiser analyzes insurance-to-value (ITV) ratios across a portfolio, a ratio significantly below 100% indicates:

Accepted Answer

The properties are underinsured, meaning the coverage limit is less than the actual replacement cost

Answer

An ITV ratio below 100% means the policy limit is less than the property's actual replacement cost, leaving the insured potentially responsible for a portion of losses.

(CIA) Certified Insurance Appraiser Practice Test

(CIA) Certified Insurance Appraiser Practice Test

CIA CIA Insurance Market Analysis & Pricing 2