Portfolio Management & Strategy Flashcards
7 cards from real TRIP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Portfolio Management & Strategy flashcards as text
A transportation underwriter notices that 40% of their cargo book is concentrated in a single Gulf Coast port. Which portfolio management action best addresses this exposure?
Answer: Implement geographic spread guidelines to cap port concentration below a defined threshold
Implementing concentration guidelines is the strategic portfolio-level solution that reduces systemic exposure before individual risk selection.
Under a quota share reinsurance treaty, if the ceding percentage is 50% and a covered loss is $600,000, how much does the cedant retain?
Answer: $300,000
Under a 50% quota share, the cedant retains 50% of every loss, so 50% × $600,000 = $300,000.
Which reinsurance structure is most appropriate for a transportation insurer seeking to protect against a single catastrophic loss event while retaining a large volume of small-to-medium losses?
Answer: Per-occurrence excess of loss
Per-occurrence excess of loss responds above a retention point for a single event, protecting against catastrophic individual losses while leaving attritional losses with the cedant.
Risk correlation in a transportation insurance portfolio is MOST concerning when:
Answer: Multiple policies share the same vessel, driver, or corridor exposure
Risks sharing the same physical assets or routes are highly correlated and can produce simultaneous losses, amplifying aggregate exposure.
A transportation insurer uses catastrophe modeling for its port-to-port cargo book. The primary purpose of this modeling in portfolio management is to:
Answer: Estimate maximum probable loss to inform reinsurance purchasing decisions
Catastrophe modeling estimates aggregate probable maximum losses, which directly informs how much reinsurance protection the portfolio needs.
When managing a trucking liability portfolio, an underwriter decides to reduce exposure to long-haul refrigerated carriers. This is an example of:
Answer: Portfolio steering through risk appetite adjustment
Portfolio steering involves deliberately shifting the mix of business written to align with the insurer's risk appetite and profitability targets.
Which statement BEST describes the advantage of facultative reinsurance over treaty reinsurance for a transportation insurer?
Answer: Facultative allows the reinsurer to individually underwrite and price unique or oversized risks
Facultative reinsurance is negotiated case-by-case, making it ideal for atypical, high-value, or complex transportation risks that don't fit treaty parameters.