AIIM Certified Reinsurance Specialist CRS Exam
**Question 1.Which term best describes reinsurance?**
A) Insurance of individuals
B) Insurance of insurers
C) Investment of premiums
D) Underwriting of policies
Answer: B
Explanation: Reinsurance is commonly defined as the “insurance of insurers,” where primary
insurers transfer portions of their risk to reinsurers.
**Question 2.What is the primary function of reinsurance capacity?**
A) To increase underwriting profit margins
B) To allow insurers to write larger policies than their own capital would permit
C) To reduce the need for actuarial analysis
D) To eliminate all underwriting risk
Answer: B
Explanation: Capacity enables primary insurers to underwrite large‑line business that exceeds
their own capital limits.
**Question 3.Which of the following is NOT a typical function of reinsurance?**
A) Catastrophe protection
B) Capital relief
C) Direct sales to consumers
D) Stabilization of earnings
Answer: C
Explanation: Direct sales to consumers are performed by primary insurers, not by reinsurance.
**Question 4.In reinsurance terminology, who is the “cedent”?**
, AIIM Certified Reinsurance Specialist CRS Exam
A) The reinsurer
B) The primary insurer transferring risk
C) The broker facilitating the transaction
D) The regulator overseeing the contract
Answer: B
Explanation: The cedent (or ceding company) is the primary insurer that cedes risk to a
reinsurer.
**Question 5.What does “retrocession” refer to?**
A) The initial placement of a treaty
B) A reinsurer transferring risk to another reinsurer
C) The payment of premiums by the cedent
D) The settlement of a claim by the primary insurer
Answer: B
Explanation: Retrocession is the practice of a reinsurer purchasing reinsurance for part of the
risk it has assumed.
**Question 6.In a typical reinsurance transaction, which cash flow moves from the cedent to
the reinsurer?**
A) Claims payments
B) Premiums
C) Investment income
D) Tax refunds
Answer: B
Explanation: The cedent pays reinsurance premiums to the reinsurer in exchange for risk
transfer.
, AIIM Certified Reinsurance Specialist CRS Exam
**Question 7.Who generally provides the technical underwriting expertise in a reinsurance
placement?**
A) The cedent’s marketing department
B) The reinsurer’s underwriting team
C) The regulator’s compliance office
D) The policyholder’s claims adjuster
Answer: B
Explanation: Reinsurers have specialized underwriting teams that assess the risk transferred by
the cedent.
**Question 8.What role does a reinsurance broker primarily play?**
A) Underwriting risk on behalf of the reinsurer
B. Facilitating communication and placement between cedents and reinsurers
C. Issuing insurance policies to end‑users
D. Regulating market conduct
Answer: B
Explanation: Brokers act as intermediaries, matching cedents with suitable reinsurers and
negotiating terms.
**Question 9.How does reinsurance help manage Solvency II capital requirements?**
A. By increasing the cedent’s retained risk
B. By providing capital relief through risk transfer, reducing required capital
C. By eliminating the need for internal models
D. By allowing the cedent to ignore underwriting standards
Answer: B
Explanation: Transferring risk to reinsurers reduces the amount of capital a cedent must hold
under Solvency II.
, AIIM Certified Reinsurance Specialist CRS Exam
**Question 10.Facultative reinsurance is best characterized by which feature?**
A. Automatic coverage of all policies in a portfolio
B. Individual risk placement on a case‑by‑case basis
C. A long‑term treaty covering a line of business
D. No underwriting review required
Answer: B
Explanation: Facultative reinsurance deals with single risks selected individually rather than
automatically.
**Question 11.What is a primary disadvantage of facultative reinsurance?**
A. High flexibility
B. Low administrative burden
C. Potential for slower placement due to case‑by‑case negotiation
D. Automatic coverage for all risks
Answer: C
Explanation: Because each risk is negotiated separately, facultative placements can be
time‑consuming.
**Question 12.Which type of facultative facility provides automatic placement for a predefined
set of risks?**
A. Manual facultative
B. Semi‑automatic facultative
C. Treaty facultative
D. Retrocession facultative
Answer: B
**Question 1.Which term best describes reinsurance?**
A) Insurance of individuals
B) Insurance of insurers
C) Investment of premiums
D) Underwriting of policies
Answer: B
Explanation: Reinsurance is commonly defined as the “insurance of insurers,” where primary
insurers transfer portions of their risk to reinsurers.
**Question 2.What is the primary function of reinsurance capacity?**
A) To increase underwriting profit margins
B) To allow insurers to write larger policies than their own capital would permit
C) To reduce the need for actuarial analysis
D) To eliminate all underwriting risk
Answer: B
Explanation: Capacity enables primary insurers to underwrite large‑line business that exceeds
their own capital limits.
**Question 3.Which of the following is NOT a typical function of reinsurance?**
A) Catastrophe protection
B) Capital relief
C) Direct sales to consumers
D) Stabilization of earnings
Answer: C
Explanation: Direct sales to consumers are performed by primary insurers, not by reinsurance.
**Question 4.In reinsurance terminology, who is the “cedent”?**
, AIIM Certified Reinsurance Specialist CRS Exam
A) The reinsurer
B) The primary insurer transferring risk
C) The broker facilitating the transaction
D) The regulator overseeing the contract
Answer: B
Explanation: The cedent (or ceding company) is the primary insurer that cedes risk to a
reinsurer.
**Question 5.What does “retrocession” refer to?**
A) The initial placement of a treaty
B) A reinsurer transferring risk to another reinsurer
C) The payment of premiums by the cedent
D) The settlement of a claim by the primary insurer
Answer: B
Explanation: Retrocession is the practice of a reinsurer purchasing reinsurance for part of the
risk it has assumed.
**Question 6.In a typical reinsurance transaction, which cash flow moves from the cedent to
the reinsurer?**
A) Claims payments
B) Premiums
C) Investment income
D) Tax refunds
Answer: B
Explanation: The cedent pays reinsurance premiums to the reinsurer in exchange for risk
transfer.
, AIIM Certified Reinsurance Specialist CRS Exam
**Question 7.Who generally provides the technical underwriting expertise in a reinsurance
placement?**
A) The cedent’s marketing department
B) The reinsurer’s underwriting team
C) The regulator’s compliance office
D) The policyholder’s claims adjuster
Answer: B
Explanation: Reinsurers have specialized underwriting teams that assess the risk transferred by
the cedent.
**Question 8.What role does a reinsurance broker primarily play?**
A) Underwriting risk on behalf of the reinsurer
B. Facilitating communication and placement between cedents and reinsurers
C. Issuing insurance policies to end‑users
D. Regulating market conduct
Answer: B
Explanation: Brokers act as intermediaries, matching cedents with suitable reinsurers and
negotiating terms.
**Question 9.How does reinsurance help manage Solvency II capital requirements?**
A. By increasing the cedent’s retained risk
B. By providing capital relief through risk transfer, reducing required capital
C. By eliminating the need for internal models
D. By allowing the cedent to ignore underwriting standards
Answer: B
Explanation: Transferring risk to reinsurers reduces the amount of capital a cedent must hold
under Solvency II.
, AIIM Certified Reinsurance Specialist CRS Exam
**Question 10.Facultative reinsurance is best characterized by which feature?**
A. Automatic coverage of all policies in a portfolio
B. Individual risk placement on a case‑by‑case basis
C. A long‑term treaty covering a line of business
D. No underwriting review required
Answer: B
Explanation: Facultative reinsurance deals with single risks selected individually rather than
automatically.
**Question 11.What is a primary disadvantage of facultative reinsurance?**
A. High flexibility
B. Low administrative burden
C. Potential for slower placement due to case‑by‑case negotiation
D. Automatic coverage for all risks
Answer: C
Explanation: Because each risk is negotiated separately, facultative placements can be
time‑consuming.
**Question 12.Which type of facultative facility provides automatic placement for a predefined
set of risks?**
A. Manual facultative
B. Semi‑automatic facultative
C. Treaty facultative
D. Retrocession facultative
Answer: B
