AIIM Certified Chief Reinsurance Officer CCRO
Exam
**Question 1.** Which treaty type provides the ceding insurer with a fixed percentage of each
loss?
A) Quota Share
B) Surplus
C) Excess of Loss (Per Risk)
D) Stop‑Loss
**Answer:** A
**Explanation:** A Quota Share treaty transfers a set proportion of every loss, premium, and
expense to the reinsurer.
**Question 2.** In a surplus treaty, the ceding insurer retains the first ______ of liability on
each risk.
A) 10%
B) 25%
C) 50%
D) 75%
**Answer:** B
**Explanation:** Surplus treaties retain a predefined “retention limit” (often 25% of the risk)
before the reinsurer’s participation begins.
**Question 3.** An attachment point in an Excess of Loss treaty is best described as:
A) The maximum loss the reinsurer will pay.
B) The loss amount at which the reinsurer starts to pay.
C) The insurer’s total premium.
D) The deductible paid by the reinsurer.
**Answer:** B
, AIIM Certified Chief Reinsurance Officer CCRO
Exam
**Explanation:** The attachment point is the loss threshold that must be exceeded before the
reinsurer becomes liable.
**Question 4.** Which pricing method uses historical loss experience to estimate future
premiums?
A) Exposure rating
B) Burning cost analysis
C) Market‑based pricing
D) Fixed‑margin pricing
**Answer:** B
**Explanation:** Burning cost analysis calculates premiums based on past loss ratios, adjusting
for inflation and other factors.
**Question 5.** The “follow the fortunes” clause in reinsurance contracts primarily addresses:
A) Profit sharing.
B. Arbitration procedures.
C. Alignment of the reinsurer’s obligations with the ceding insurer’s solvency.
D. Tax treatment of premiums.
**Answer:** C
**Explanation:** This clause ties the reinsurer’s liability to the ceding insurer’s financial
condition, ensuring consistent treatment in insolvency.
**Question 6.** Which credit rating agency is most commonly used by reinsurers for assessing
counterparties?
A) Moody’s
B) S&P
C) Fitch
, AIIM Certified Chief Reinsurance Officer CCRO
Exam
D) All of the above equally
**Answer:** D
**Explanation:** All three agencies (Moody’s, S&P, Fitch) are widely accepted for evaluating
reinsurer creditworthiness.
**Question 7.** A facultative treaty is typically employed when:
A) The portfolio is homogeneous.
B) The risk is standard and low‑value.
C) The risk is large, unusual, or outside treaty limits.
D) The insurer wants to cede all its business.
**Answer:** C
**Explanation:** Facultative reinsurance covers individual, high‑value, or atypical risks not
suited for treaty reinsurance.
**Question 8.** In a Stop‑Loss treaty, the “exhaustion point” refers to:
A) The point where the reinsurer’s liability ends for the period.
B) The ceding insurer’s deductible.
C) The maximum premium payable.
D. The attachment point for each claim.
**Answer:** A
**Explanation:** The exhaustion point caps the total amount the reinsurer will pay during the
contract term.
**Question 9.** Under Solvency II, which capital relief mechanism is most directly achieved
through reinsurance?
A) Risk‑adjusted return on capital (RAROC).
, AIIM Certified Chief Reinsurance Officer CCRO
Exam
B) Reduction of the Solvency Capital Requirement (SCR).
C. Increase in the Minimum Capital Requirement (MCR).
D. None of the above.
**Answer:** B
**Explanation:** Reinsurance can lower the insurer’s SCR by transferring risk, thereby providing
capital relief.
**Question 10.** IFRS 17 changes reinsurance accounting primarily by:
A) Eliminating the need for deferred acquisition costs.
B. Requiring the “Contractual Service Margin” to be allocated to reinsurance contracts.
C. Removing the distinction between direct and reinsurance contracts.
D. Allowing insurers to ignore reinsurance recoverables.
**Answer:** B
**Explanation:** IFRS 17 introduces the Contractual Service Margin (CSM) which must be
calculated for both direct and reinsurance contracts.
**Question 11.** Which of the following best describes “burning cost” in reinsurance pricing?
A) The cost of reinsurer’s capital.
B) The expected loss cost derived from historical data.
C) The profit margin added by the reinsurer.
D) The administrative expense of the treaty.
**Answer:** B
**Explanation:** Burning cost reflects the pure loss cost based on past experience, before
loading expenses and profit.
**Question 12.** A “per occurrence” Excess of Loss treaty protects against:
Exam
**Question 1.** Which treaty type provides the ceding insurer with a fixed percentage of each
loss?
A) Quota Share
B) Surplus
C) Excess of Loss (Per Risk)
D) Stop‑Loss
**Answer:** A
**Explanation:** A Quota Share treaty transfers a set proportion of every loss, premium, and
expense to the reinsurer.
**Question 2.** In a surplus treaty, the ceding insurer retains the first ______ of liability on
each risk.
A) 10%
B) 25%
C) 50%
D) 75%
**Answer:** B
**Explanation:** Surplus treaties retain a predefined “retention limit” (often 25% of the risk)
before the reinsurer’s participation begins.
**Question 3.** An attachment point in an Excess of Loss treaty is best described as:
A) The maximum loss the reinsurer will pay.
B) The loss amount at which the reinsurer starts to pay.
C) The insurer’s total premium.
D) The deductible paid by the reinsurer.
**Answer:** B
, AIIM Certified Chief Reinsurance Officer CCRO
Exam
**Explanation:** The attachment point is the loss threshold that must be exceeded before the
reinsurer becomes liable.
**Question 4.** Which pricing method uses historical loss experience to estimate future
premiums?
A) Exposure rating
B) Burning cost analysis
C) Market‑based pricing
D) Fixed‑margin pricing
**Answer:** B
**Explanation:** Burning cost analysis calculates premiums based on past loss ratios, adjusting
for inflation and other factors.
**Question 5.** The “follow the fortunes” clause in reinsurance contracts primarily addresses:
A) Profit sharing.
B. Arbitration procedures.
C. Alignment of the reinsurer’s obligations with the ceding insurer’s solvency.
D. Tax treatment of premiums.
**Answer:** C
**Explanation:** This clause ties the reinsurer’s liability to the ceding insurer’s financial
condition, ensuring consistent treatment in insolvency.
**Question 6.** Which credit rating agency is most commonly used by reinsurers for assessing
counterparties?
A) Moody’s
B) S&P
C) Fitch
, AIIM Certified Chief Reinsurance Officer CCRO
Exam
D) All of the above equally
**Answer:** D
**Explanation:** All three agencies (Moody’s, S&P, Fitch) are widely accepted for evaluating
reinsurer creditworthiness.
**Question 7.** A facultative treaty is typically employed when:
A) The portfolio is homogeneous.
B) The risk is standard and low‑value.
C) The risk is large, unusual, or outside treaty limits.
D) The insurer wants to cede all its business.
**Answer:** C
**Explanation:** Facultative reinsurance covers individual, high‑value, or atypical risks not
suited for treaty reinsurance.
**Question 8.** In a Stop‑Loss treaty, the “exhaustion point” refers to:
A) The point where the reinsurer’s liability ends for the period.
B) The ceding insurer’s deductible.
C) The maximum premium payable.
D. The attachment point for each claim.
**Answer:** A
**Explanation:** The exhaustion point caps the total amount the reinsurer will pay during the
contract term.
**Question 9.** Under Solvency II, which capital relief mechanism is most directly achieved
through reinsurance?
A) Risk‑adjusted return on capital (RAROC).
, AIIM Certified Chief Reinsurance Officer CCRO
Exam
B) Reduction of the Solvency Capital Requirement (SCR).
C. Increase in the Minimum Capital Requirement (MCR).
D. None of the above.
**Answer:** B
**Explanation:** Reinsurance can lower the insurer’s SCR by transferring risk, thereby providing
capital relief.
**Question 10.** IFRS 17 changes reinsurance accounting primarily by:
A) Eliminating the need for deferred acquisition costs.
B. Requiring the “Contractual Service Margin” to be allocated to reinsurance contracts.
C. Removing the distinction between direct and reinsurance contracts.
D. Allowing insurers to ignore reinsurance recoverables.
**Answer:** B
**Explanation:** IFRS 17 introduces the Contractual Service Margin (CSM) which must be
calculated for both direct and reinsurance contracts.
**Question 11.** Which of the following best describes “burning cost” in reinsurance pricing?
A) The cost of reinsurer’s capital.
B) The expected loss cost derived from historical data.
C) The profit margin added by the reinsurer.
D) The administrative expense of the treaty.
**Answer:** B
**Explanation:** Burning cost reflects the pure loss cost based on past experience, before
loading expenses and profit.
**Question 12.** A “per occurrence” Excess of Loss treaty protects against:
