GAC Risk Assessment & Underwriting 3

Question 1

Which underwriting factor is most unique to governmental entities compared to private commercial accounts when assessing liability exposure?

Accepted Answer

Sovereign immunity statutes and statutory liability caps

Answer

Governmental liability underwriting uniquely considers sovereign immunity laws and statutory caps that limit the government's legal exposure.

Question 2

In risk pooling for governmental entities, 'spread of risk' is achieved primarily by:

Accepted Answer

Aggregating exposures from many members so no single loss devastates the pool

Answer

Risk pooling achieves spread of risk by aggregating many members' exposures so that any one large loss is shared across the pool.

Question 3

Under GASB 10, pool participants that transfer risk to a public entity risk pool should report:

Accepted Answer

A liability only if it is probable the entity will be assessed for pool deficits

Answer

Under GASB 10, a pool participant recognizes a liability only when it is probable the entity will be assessed by the pool to fund a deficit.

Question 4

The 'experience modification factor' in workers' compensation underwriting for a government adjusts the premium based on:

Accepted Answer

The entity's actual loss experience compared to the expected losses for its class

Answer

The experience modification (mod) factor compares the entity's actual historical losses to what would be expected for similar employers, adjusting the premium up or down.

Question 5

When conducting an underwriting review of a municipality's police department, which exposure is classified as a professional liability risk rather than a general liability risk?

Accepted Answer

An allegation of excessive force or wrongful arrest by an officer

Answer

Excessive force and wrongful arrest claims arise from the officer's professional duties and are underwritten as law enforcement professional liability (EPL).

(GAC) Governmental Accounting Certification Practice Test

(GAC) Governmental Accounting Certification Practice Test

GAC Risk Assessment & Underwriting 3