CPCU 520, Chapter 4 exam with verified answers
Policyholders' |surplus |- |correct |answer |-Under |statutory |accounting |principles |an |insurer's |total |
admitted |assets |minus |its |total |liabilities
Capacity |- |correct |answer |-The |amount |of |business |an |insurer |is |able |to |write, |usually |based |on |a |
comparison |of |the |insurer's |written |premium |to |its |policyholders' |surplus
Underwriting |authority |- |correct |answer |-The |scope |of |decisions |that |an |underwriter |can |make |
without |receiving |approval |from |someone |at |a |higher |level
Line |underwriter |- |correct |answer |-Underwriting |who |is |primarily |responsible |for |implmeneting |the |
steps |in |the |underwriting |process
Staff |underwriter |- |correct |answer |-Underwriter |who |is |usually |located |in |the |home |office |and |who |
assists |underwriting |management |with |making |and |implementing |underwriting |policy
manuscript |policy |- |correct |answer |-An |insurance |policy |that |is |specifically |drafted |according |to |
terms |negotiated |between |a |specific |insured |(or |group |of |insureds) |and |an |insurer.
Underwriting |policy/philosophy |- |correct |answer |-A |guide |to |individual |and |aggregate |policy |
selection |that |supports |an |insurer's |mission |statement
How |is |Underwriting |policy |communicated? |- |correct |answer |-Through |Underwriting |guidelines
Trending |- |correct |answer |-A |statistical |technique |for |analyzing |environmental |changes |and |
projecting |such |changes |into |the |future
Loss |development |- |correct |answer |-The |increase |of |decrease |of |incurred |losses |over |time
, Treaty |reinsurance |- |correct |answer |-A |reinsurance |agreement |that |covers |an |entire |class |or |
portfolio |of |loss |exposures |and |provides |that |the |primary |insurer's |individual |loss |exposures |that |
fall |within |the |treaty |are |automatically |reinsured
Underwriting |audit |- |correct |answer |-A |reveiw |of |underwriting |files |to |ensure |that |individual |
underwriters |are |adhering |to |underwriting |guidelines
Capacity |ratio |aka |premium |to |surplus |ratio |- |correct |answer |-A |capcity |ratio |that |indiciates |an |
insurer's |financial |strength |by |relating |net |written |premium |to |policyholder |surplus.
Constraints |in |establishing |underwriting |policy |- |correct |answer |-Financial |Capacity
Personnel
Regulation
Reinsurance
Statutory |accounting |principles |- |correct |answer |-The |accounting |principles |and |practices |that |are |
prescribed |or |permitted |by |an |insurer's |domicillary |state |and |that |insurer's |must |follow
Return |on |equity |- |correct |answer |-A |profitability |ratio |expressed |as |a |percentage |by |dividing |a |
company's |net |income |by |its |net |worth |(book |value).
An |acceptable |return |on |equity |falls |between |_ |% |and |_ |% |- |correct |answer |-5 |and |15
ROE |Stat |- |correct |answer |-Net |income/average |policyholder |surplus
ROE |GAAP |- |correct |answer |-Net |income/average |owners |equity
Market |Conduct |Examination |- |correct |answer |-An |analysis |of |an |insurer's |practices |in |four |
operational |areas...sales |and |advertising, |underwriting, |ratemaking |and |claims |handling
Underwriting |guidelines |serve |these |purposes |- |correct |answer |-Provide |for |structured |decisions
Policyholders' |surplus |- |correct |answer |-Under |statutory |accounting |principles |an |insurer's |total |
admitted |assets |minus |its |total |liabilities
Capacity |- |correct |answer |-The |amount |of |business |an |insurer |is |able |to |write, |usually |based |on |a |
comparison |of |the |insurer's |written |premium |to |its |policyholders' |surplus
Underwriting |authority |- |correct |answer |-The |scope |of |decisions |that |an |underwriter |can |make |
without |receiving |approval |from |someone |at |a |higher |level
Line |underwriter |- |correct |answer |-Underwriting |who |is |primarily |responsible |for |implmeneting |the |
steps |in |the |underwriting |process
Staff |underwriter |- |correct |answer |-Underwriter |who |is |usually |located |in |the |home |office |and |who |
assists |underwriting |management |with |making |and |implementing |underwriting |policy
manuscript |policy |- |correct |answer |-An |insurance |policy |that |is |specifically |drafted |according |to |
terms |negotiated |between |a |specific |insured |(or |group |of |insureds) |and |an |insurer.
Underwriting |policy/philosophy |- |correct |answer |-A |guide |to |individual |and |aggregate |policy |
selection |that |supports |an |insurer's |mission |statement
How |is |Underwriting |policy |communicated? |- |correct |answer |-Through |Underwriting |guidelines
Trending |- |correct |answer |-A |statistical |technique |for |analyzing |environmental |changes |and |
projecting |such |changes |into |the |future
Loss |development |- |correct |answer |-The |increase |of |decrease |of |incurred |losses |over |time
, Treaty |reinsurance |- |correct |answer |-A |reinsurance |agreement |that |covers |an |entire |class |or |
portfolio |of |loss |exposures |and |provides |that |the |primary |insurer's |individual |loss |exposures |that |
fall |within |the |treaty |are |automatically |reinsured
Underwriting |audit |- |correct |answer |-A |reveiw |of |underwriting |files |to |ensure |that |individual |
underwriters |are |adhering |to |underwriting |guidelines
Capacity |ratio |aka |premium |to |surplus |ratio |- |correct |answer |-A |capcity |ratio |that |indiciates |an |
insurer's |financial |strength |by |relating |net |written |premium |to |policyholder |surplus.
Constraints |in |establishing |underwriting |policy |- |correct |answer |-Financial |Capacity
Personnel
Regulation
Reinsurance
Statutory |accounting |principles |- |correct |answer |-The |accounting |principles |and |practices |that |are |
prescribed |or |permitted |by |an |insurer's |domicillary |state |and |that |insurer's |must |follow
Return |on |equity |- |correct |answer |-A |profitability |ratio |expressed |as |a |percentage |by |dividing |a |
company's |net |income |by |its |net |worth |(book |value).
An |acceptable |return |on |equity |falls |between |_ |% |and |_ |% |- |correct |answer |-5 |and |15
ROE |Stat |- |correct |answer |-Net |income/average |policyholder |surplus
ROE |GAAP |- |correct |answer |-Net |income/average |owners |equity
Market |Conduct |Examination |- |correct |answer |-An |analysis |of |an |insurer's |practices |in |four |
operational |areas...sales |and |advertising, |underwriting, |ratemaking |and |claims |handling
Underwriting |guidelines |serve |these |purposes |- |correct |answer |-Provide |for |structured |decisions
