TRIP Portfolio Management & Strategy 4

Question 1

A large trucking company establishes a captive insurance company to cover its fleet liability. The PRIMARY portfolio strategy benefit of this structure is:

Accepted Answer

Retaining underwriting profit and gaining direct access to reinsurance markets

Answer

A captive allows the parent to retain underwriting profits in favorable years and access reinsurance directly, improving cost efficiency and risk visibility.

Question 2

Under a large deductible (LD) program for a transportation fleet, the insurer's role is BEST described as:

Accepted Answer

Providing a fronting policy with statutory limits while the insured funds losses within the deductible layer

Answer

In an LD program, the carrier issues the policy and pays all claims but is reimbursed by the insured for amounts within the agreed deductible, often backed by collateral.

Question 3

Collateral is required from an insured under a large deductible program to:

Accepted Answer

Protect the insurer against the insured's failure to reimburse deductible losses

Answer

Collateral—typically a letter of credit or escrow—secures the insured's reimbursement obligation, protecting the insurer if the insured becomes insolvent.

Question 4

A retrospective rating plan for a transportation insurer adjusts final premium based on:

Accepted Answer

The insured's actual loss experience during the policy period within a minimum and maximum premium range

Answer

Retrospective rating aligns final premium with the insured's own loss experience, bounded by a minimum and maximum to limit risk transfer in both directions.

Question 5

A self-insured retention (SIR) differs from a traditional deductible in that:

Accepted Answer

The insured handles and pays claims within the SIR before the insurer's policy is triggered

Answer

Under an SIR, the insured controls and pays claims within the retention amount, whereas under a traditional deductible the insurer pays all claims and seeks reimbursement.

(TRIP) Transportation Risk and Insurance Professional Practice Test

(TRIP) Transportation Risk and Insurance Professional Practice Test

TRIP Portfolio Management & Strategy 4