TRIP Financial Analysis & Planning 2

Question 1

A trucking company's combined ratio is 108%. What does this indicate about its underwriting performance?

Accepted Answer

The company is losing money on underwriting operations

Answer

A combined ratio above 100% means the insurer pays out more in losses and expenses than it collects in premiums, indicating an underwriting loss.

Question 2

Which financial metric best measures how efficiently a transportation company converts revenue into net profit?

Accepted Answer

Net profit margin

Answer

Net profit margin (net income divided by revenue) directly measures how much profit is generated per dollar of revenue.

Question 3

In transportation risk management, a 'captive insurance company' is primarily used to:

Accepted Answer

Self-fund retained risks through a company-owned insurer

Answer

A captive insurer is a subsidiary created by a parent company to underwrite its own risks, allowing it to retain premiums and manage exposures internally.

Question 4

What is the primary purpose of an actuarial loss development triangle in transportation insurance?

Accepted Answer

To project how reported losses will grow to their ultimate settled values

Answer

Loss development triangles track how incurred losses change over successive evaluation periods, allowing actuaries to project ultimate loss amounts.

Question 5

A motor carrier with $5M in assets and $3.5M in liabilities has a leverage ratio of:

Accepted Answer

0.7:1

Answer

The debt-to-asset ratio is $3.5M / $5M = 0.70, meaning liabilities represent 70% of total assets.

(TRIP) Transportation Risk and Insurance Professional Practice Test

(TRIP) Transportation Risk and Insurance Professional Practice Test

TRIP Financial Analysis & Planning 2