LOMA 280 FINAL PAPER 2026 DETAILED
QUESTIONS ACCURATE ANSWERS
PREMIUM QUALITY
◉ Speculative risk
Answer: 3 possible outcomes: gain, loss, or no change
◉ Pure risk
Answer: No gain; either loss or no loss. Only type of risk than can be
insured
◉ 4 methods for managing financial risk
Answer: Avoiding, controlling, transferring, accepting
◉ Personal Risk
Answer: Risk of economic loss associated with death, poor health,
injury, and outliving economic resources
◉ Liability risk
Answer: Risk of economic loss resulting from a person being held
legally responsible for harming others or their property
,◉ 5 characteristics of insurable risks
Answer: Loss must occur by chance
Loss must be definite
Loss must be significant
Loss rate must be predictable
Loss must not be catastrophic to the insurer
◉ Contract of indemnity
Answer: Policy in which the amount of benefit is based on actual
amount of financial loss that results from covered event
◉ Valued contract
Answer: Specifies amount payable when loss occurs (face value)
◉ Loss rate
Answer: Frequency of losses insureds are likely to experience
◉ Law of large numbers
Answer: The more events that occur the more likely results will
approximate true probability p
,◉ Mortality tables
Answer: Number of people in a large group that are likely to die at a
given age
◉ Mortality rate
Answer: Rate at which death occurs among a group of people during
a specific time period
◉ Morbidity table
Answer: Charts that display morbidity rates
◉ Morbidity rates
Answer: Amount of incidents of sickness or accidents by age of
people over a given time period
◉ Reinsurance
Answer: Insurance the direct writer purchases from the reinsurer to
transfer risk on policies that the direct writer issued
◉ Underwriting
Answer: Process of identifying and classifying degree of risk by a
proposed insured
, ◉ Anti-selection
Answer: Tendency to believe you have greater likelihood of loss than
others
◉ 2 stages of underwriting
Answer: Identifying risk that an insured presents
Classifying the degree of risk that an insured presents
◉ Physical hazard
Answer: Physical characteristic that may increase the likelihood of
loss
◉ Moral hazard
Answer: Reputation financial position or criminal record of an
applicant indicates they may act dishonestly
◉ 4 risk classes
Answer: Standard risks
Preferred risks
Substandard risks
Declined risk
QUESTIONS ACCURATE ANSWERS
PREMIUM QUALITY
◉ Speculative risk
Answer: 3 possible outcomes: gain, loss, or no change
◉ Pure risk
Answer: No gain; either loss or no loss. Only type of risk than can be
insured
◉ 4 methods for managing financial risk
Answer: Avoiding, controlling, transferring, accepting
◉ Personal Risk
Answer: Risk of economic loss associated with death, poor health,
injury, and outliving economic resources
◉ Liability risk
Answer: Risk of economic loss resulting from a person being held
legally responsible for harming others or their property
,◉ 5 characteristics of insurable risks
Answer: Loss must occur by chance
Loss must be definite
Loss must be significant
Loss rate must be predictable
Loss must not be catastrophic to the insurer
◉ Contract of indemnity
Answer: Policy in which the amount of benefit is based on actual
amount of financial loss that results from covered event
◉ Valued contract
Answer: Specifies amount payable when loss occurs (face value)
◉ Loss rate
Answer: Frequency of losses insureds are likely to experience
◉ Law of large numbers
Answer: The more events that occur the more likely results will
approximate true probability p
,◉ Mortality tables
Answer: Number of people in a large group that are likely to die at a
given age
◉ Mortality rate
Answer: Rate at which death occurs among a group of people during
a specific time period
◉ Morbidity table
Answer: Charts that display morbidity rates
◉ Morbidity rates
Answer: Amount of incidents of sickness or accidents by age of
people over a given time period
◉ Reinsurance
Answer: Insurance the direct writer purchases from the reinsurer to
transfer risk on policies that the direct writer issued
◉ Underwriting
Answer: Process of identifying and classifying degree of risk by a
proposed insured
, ◉ Anti-selection
Answer: Tendency to believe you have greater likelihood of loss than
others
◉ 2 stages of underwriting
Answer: Identifying risk that an insured presents
Classifying the degree of risk that an insured presents
◉ Physical hazard
Answer: Physical characteristic that may increase the likelihood of
loss
◉ Moral hazard
Answer: Reputation financial position or criminal record of an
applicant indicates they may act dishonestly
◉ 4 risk classes
Answer: Standard risks
Preferred risks
Substandard risks
Declined risk
