LM1 – CII Exam Questions and Answers
Verified 100% Correct
The primary function of insurance is to act as a risk transfer mechanism, which
means that it - ANSWER -Transfers a risk from the insured to the insurer
An insurer fails to adequately manage its claims‐handling processes, resulting in
inadequate reserves being set aside. What is the most likely ultimate outcome for
the insurer? - ANSWER -Insolvency
What class of insurance can provide cover for non‐repayment of outstanding debts
due to expropriation of assets by a foreign Government's actions? - ANSWER -
Political risks insurance
A toy manufacturer discovers that one of its toys has a safety issue. The toy is
removed from sale immediately and any retailer or consumer that has purchased
the product is refunded. What class of insurance would provide cover against the
financial consequences of this event? - ANSWER -Product recall insurance
What class of business written in the London Market will provide indemnity to a
shipowner for damage to the hull of a vessel? - ANSWER -Marine
Particular average is a feature of which type of insurance? - ANSWER -Marine
What immediately follows higher capacity in a typical insurance cycle? -
ANSWER -Lower prices
An insured requests that the sum insured on his office block is increased to an
amount that is greater than his insurer's normal acceptance limit. The insurer will
normally be able to continue to underwrite the office block for its full sum insured
by - ANSWER -Purchasing reinsurance
, The two main benefits of purchasing reinsurance are to increase capacity and to -
ANSWER -Provide greater stability in trading results for insurers
Reinsurance of individual risks, where the reinsurer retains the authority to accept
or reject each risk offered, is known as what type of reinsurance? - ANSWER -
Facultative
The London Market is often utilised for the placing of insurance because it offers
a good claims service provided by experienced and knowledgeable claims
handlers, has experienced and entrepreneurial underwriters that can consider new
emerging risks and provide bespoke insurance coverage and - ANSWER -Provides
sufficient capacity to place large and complex risks
Business is transacted largely on a subscription basis within the London Market,
which means that - ANSWER -Business is placed with more than one underwriter
Protection and indemnity clubs provide insurance for - ANSWER -Shipowners
What is the main purpose of the International Underwriting Association of
London? - ANSWER -To secure an optimal trading environment for its members
The broker for a utilities company is most likely to place a power station risk
within the London Market because the - ANSWER -Subscription market provides
sufficient capacity to underwrite the risk
Under a contract of insurance, an insurer - ANSWER -Agreed to pay an amount to
the insured upon the occurrence of an insured event, in return for consideration by
the insured
How much of a non‐compulsory insurance claim will the Financial Services
Compensation Scheme pay if an insurer becomes insolvent prior to the claim being
settled? - ANSWER -90% of the claim
What is the role of the Financial Ombudsman Service? - ANSWER -To help
resolve individual disputes between consumers and financial institutions
Verified 100% Correct
The primary function of insurance is to act as a risk transfer mechanism, which
means that it - ANSWER -Transfers a risk from the insured to the insurer
An insurer fails to adequately manage its claims‐handling processes, resulting in
inadequate reserves being set aside. What is the most likely ultimate outcome for
the insurer? - ANSWER -Insolvency
What class of insurance can provide cover for non‐repayment of outstanding debts
due to expropriation of assets by a foreign Government's actions? - ANSWER -
Political risks insurance
A toy manufacturer discovers that one of its toys has a safety issue. The toy is
removed from sale immediately and any retailer or consumer that has purchased
the product is refunded. What class of insurance would provide cover against the
financial consequences of this event? - ANSWER -Product recall insurance
What class of business written in the London Market will provide indemnity to a
shipowner for damage to the hull of a vessel? - ANSWER -Marine
Particular average is a feature of which type of insurance? - ANSWER -Marine
What immediately follows higher capacity in a typical insurance cycle? -
ANSWER -Lower prices
An insured requests that the sum insured on his office block is increased to an
amount that is greater than his insurer's normal acceptance limit. The insurer will
normally be able to continue to underwrite the office block for its full sum insured
by - ANSWER -Purchasing reinsurance
, The two main benefits of purchasing reinsurance are to increase capacity and to -
ANSWER -Provide greater stability in trading results for insurers
Reinsurance of individual risks, where the reinsurer retains the authority to accept
or reject each risk offered, is known as what type of reinsurance? - ANSWER -
Facultative
The London Market is often utilised for the placing of insurance because it offers
a good claims service provided by experienced and knowledgeable claims
handlers, has experienced and entrepreneurial underwriters that can consider new
emerging risks and provide bespoke insurance coverage and - ANSWER -Provides
sufficient capacity to place large and complex risks
Business is transacted largely on a subscription basis within the London Market,
which means that - ANSWER -Business is placed with more than one underwriter
Protection and indemnity clubs provide insurance for - ANSWER -Shipowners
What is the main purpose of the International Underwriting Association of
London? - ANSWER -To secure an optimal trading environment for its members
The broker for a utilities company is most likely to place a power station risk
within the London Market because the - ANSWER -Subscription market provides
sufficient capacity to underwrite the risk
Under a contract of insurance, an insurer - ANSWER -Agreed to pay an amount to
the insured upon the occurrence of an insured event, in return for consideration by
the insured
How much of a non‐compulsory insurance claim will the Financial Services
Compensation Scheme pay if an insurer becomes insolvent prior to the claim being
settled? - ANSWER -90% of the claim
What is the role of the Financial Ombudsman Service? - ANSWER -To help
resolve individual disputes between consumers and financial institutions
