TRIP Portfolio Management & Strategy 2

Question 1

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?

Accepted Answer

Implement geographic spread guidelines to cap port concentration below a defined threshold

Answer

Implementing concentration guidelines is the strategic portfolio-level solution that reduces systemic exposure before individual risk selection.

Question 2

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?

Accepted Answer

$300,000

Answer

Under a 50% quota share, the cedant retains 50% of every loss, so 50% × $600,000 = $300,000.

Question 3

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?

Accepted Answer

Per-occurrence excess of loss

Answer

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.

Question 4

Risk correlation in a transportation insurance portfolio is MOST concerning when:

Accepted Answer

Multiple policies share the same vessel, driver, or corridor exposure

Answer

Risks sharing the same physical assets or routes are highly correlated and can produce simultaneous losses, amplifying aggregate exposure.

Question 5

A transportation insurer uses catastrophe modeling for its port-to-port cargo book. The primary purpose of this modeling in portfolio management is to:

Accepted Answer

Estimate maximum probable loss to inform reinsurance purchasing decisions

Answer

Catastrophe modeling estimates aggregate probable maximum losses, which directly informs how much reinsurance protection the portfolio needs.

(TRIP) Transportation Risk and Insurance Professional Practice Test

(TRIP) Transportation Risk and Insurance Professional Practice Test

TRIP Portfolio Management & Strategy 2