CU - Certified Underwriter Commercial Underwriting Practices Questions and Answers

Question 1

An underwriter is evaluating a submission for a large chemical manufacturing plant with a total insurable value (TIV) of $150 million.
The underwriter's company has a per-risk treaty reinsurance limit of $50 million.
The risk meets all internal guidelines for safety and loss control.
What is the most appropriate next step for the underwriter to provide full coverage?

Accepted Answer

Seek facultative reinsurance for the amount exceeding the treaty limit.

Answer

Issue a policy for $50 million and advise the insured to seek coverage elsewhere for the remainder.

Answer

Decline the risk as it exceeds the company's net retention and treaty limits.

Answer

Bind coverage for the full amount and notify the reinsurance department afterward.

Question 2

In the context of workers' compensation underwriting, what does an Experience Modification Rate (Mod) of 1.15 indicate about the applicant?

Accepted Answer

The applicant's historical losses are 15% worse than the industry average.

Answer

The applicant's historical losses are 15% better than the industry average.

Answer

The applicant is a new business with no prior loss experience.

Answer

The applicant will receive a 15% credit on their standard premium.

Question 3

An underwriter receives a loss control report for a large woodworking facility. Which of the following recommendations in the report would be of the highest priority for the underwriter to see implemented before binding coverage?

Accepted Answer

Implementing a formal lockout/tagout program for machinery maintenance.

Answer

Upgrading the landscaping around the main entrance.

Answer

Repainting parking lot lines to improve traffic flow.

Answer

Installing ergonomic workstations for office staff.

Question 4

A commercial underwriter is assessing a Business Income (Business Interruption) application for a high-end restaurant that relies on a single, exclusive supplier for its imported specialty ingredients. This reliance on one supplier represents a significant:

Accepted Answer

Contingent business income exposure.

Answer

Completed operations exposure.

Answer

Premises liability exposure.

Answer

Commercial auto exposure.

Question 5

A commercial insurer's management is emphasizing the need to improve underwriting profitability. An underwriter's risk selection and pricing decisions directly impact which two primary components of the company's combined ratio?

Accepted Answer

Incurred losses and underwriting expenses.

Answer

Investment income and incurred losses.

Answer

Earned premium and investment income.

Answer

Earned premium and underwriting expenses.

Question 6

When underwriting a Commercial General Liability (CGL) policy for a construction contractor, which of the following represents the MOST significant 'products-completed operations' hazard?

Accepted Answer

The collapse of a poorly constructed balcony three years after the project was finished.

Answer

A visitor slipping and falling on a wet floor at the contractor's main office.

Answer

An employee dropping a tool from a scaffold, injuring a pedestrian below.

Answer

A company truck causing a multi-vehicle accident on the way to a job site.