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RIBO Chapter 1 Questions and Correct
Answers
What are the 5 functions of insurance? Ans: 1) Basis of Credit
System
2) Loss Prevention/Loss Reduction
3) Eliminates Worry/Encourages Entrepreneurship
4) Spread of Risk
5) Source of Employment/Investment Capital
What are the 5 Major Sections of an Agency/Broker Contract? Ans:
1) Broker's Authority
2) Ownership of Expirations
3) Commissions
4) Expenses
5) Termination
What is Treaty Reinsurance? Ans: The insurer and reinsurer
execute an insurance contract covering ALL policies within the
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, 2 | Page
scope of that contract; may oblige reinsurer to accept reinsurance
of all contracts within the scope
What is Facultative Reinsurance? Ans: The insurer cedes and the
reinsurer assumes all or part of the risk assumed by a specified
policy; negotiated separately for each contract that is reinsured
What is the definition of insurance? Ans: The undertaking by one
person to indemnify another person against loss or liability for
loss in respect of a certain risk or peril to which the object of
insurance may be exposed
What is the definition of peril? Ans: The cause of loss
What is the definition of risk? Ans: The chance of financial loss
(usually the object of insurance)
Who is an underwriter? Ans: A person who assessed the risk
people applying for insurance present to determine the coverage
they are eligible for and ensure their premium cost reflects their
level of risk (adequate pay for insured losses)
What is Reinsurance? Ans: A contractual agreement under which
one insurer (reinsured) transfers or cedes to another insurer
(reinsurer) some or all of the reinsured's obligations under
primary policies
© 2025 All rights reserved
RIBO Chapter 1 Questions and Correct
Answers
What are the 5 functions of insurance? Ans: 1) Basis of Credit
System
2) Loss Prevention/Loss Reduction
3) Eliminates Worry/Encourages Entrepreneurship
4) Spread of Risk
5) Source of Employment/Investment Capital
What are the 5 Major Sections of an Agency/Broker Contract? Ans:
1) Broker's Authority
2) Ownership of Expirations
3) Commissions
4) Expenses
5) Termination
What is Treaty Reinsurance? Ans: The insurer and reinsurer
execute an insurance contract covering ALL policies within the
© 2025 All rights reserved
, 2 | Page
scope of that contract; may oblige reinsurer to accept reinsurance
of all contracts within the scope
What is Facultative Reinsurance? Ans: The insurer cedes and the
reinsurer assumes all or part of the risk assumed by a specified
policy; negotiated separately for each contract that is reinsured
What is the definition of insurance? Ans: The undertaking by one
person to indemnify another person against loss or liability for
loss in respect of a certain risk or peril to which the object of
insurance may be exposed
What is the definition of peril? Ans: The cause of loss
What is the definition of risk? Ans: The chance of financial loss
(usually the object of insurance)
Who is an underwriter? Ans: A person who assessed the risk
people applying for insurance present to determine the coverage
they are eligible for and ensure their premium cost reflects their
level of risk (adequate pay for insured losses)
What is Reinsurance? Ans: A contractual agreement under which
one insurer (reinsured) transfers or cedes to another insurer
(reinsurer) some or all of the reinsured's obligations under
primary policies
© 2025 All rights reserved
