CRO Insurance & Risk Transfer 2

Question 1

A company purchases a $10M excess of $5M liability policy. A $12M claim occurs. How much does the insurer pay?

Accepted Answer

$7M

Answer

The insurer pays losses above the $5M retention up to the $10M limit, so $12M - $5M = $7M.

Question 2

Which insurance structure involves the insured retaining a portion of every loss rather than only losses below a threshold?

Accepted Answer

Quota share arrangement

Answer

A quota share arrangement has the insured and insurer each paying a fixed percentage of every loss.

Question 3

A CRO negotiating D&O coverage should prioritize which provision to protect the organization when executives cannot be indemnified?

Accepted Answer

Side A coverage

Answer

Side A coverage responds directly on behalf of individual directors and officers when corporate indemnification is unavailable.

Question 4

What is the primary distinction between a 'claims-made' and an 'occurrence' policy trigger?

Accepted Answer

Claims-made requires the claim to be reported during the policy period; occurrence requires the event to happen during the policy period

Answer

Claims-made policies are triggered when the claim is first made during the policy period, while occurrence policies are triggered when the underlying event occurs.

Question 5

An organization wants to limit its maximum annual loss from multiple insured events. Which policy feature best addresses this need?

Accepted Answer

Aggregate limit

Answer

An aggregate limit caps the total amount the insurer will pay for all covered losses during the policy period.

(CRO) Chief Risk Officer Certification Practice Test

(CRO) Chief Risk Officer Certification Practice Test

CRO Insurance & Risk Transfer 2