GAC Risk Assessment & Underwriting 2

Question 1

Under GASB Statement No. 10, a public entity risk pool must recognize a liability for claims when which condition is met?

Accepted Answer

It is probable that a liability has been incurred and the amount can be reasonably estimated

Answer

GASB 10 requires recognition of a claims liability when it is probable that a liability has been incurred and the amount can be reasonably estimated.

Question 2

Which risk financing technique involves a government setting aside funds internally to pay for future losses without transferring risk to an insurer?

Accepted Answer

Self-insurance reserve

Answer

A self-insurance reserve is an internal fund accumulation used to pay losses without transferring risk to an outside insurer.

Question 3

In underwriting governmental property coverage, which factor most directly affects the replacement cost valuation of public buildings?

Accepted Answer

Current construction costs per square foot for comparable structures

Answer

Replacement cost valuation uses current construction costs to rebuild a comparable structure, not historical cost or tax-assessed value.

Question 4

A government entity's actuarial loss development triangle is primarily used to:

Accepted Answer

Estimate ultimate claim costs by observing how losses mature over time

Answer

Loss development triangles track how reported claims grow toward their ultimate settled values, enabling actuaries to estimate total liability.

Question 5

When a public entity risk pool purchases excess-of-loss reinsurance, the attachment point represents:

Accepted Answer

The dollar threshold above which the reinsurer begins paying losses

Answer

The attachment point is the retained loss level at which reinsurance coverage begins to respond to claims.

(GAC) Governmental Accounting Certification Practice Test