ASLI 320 || 100% Correct Answers.
The insurer's rights to recover and sell or otherwise dispose of insured property on which the
insurer has paid a total loss are called correct answers a. Fiduciary rights.
b. Constructive rights.
c. Catastrophe rights.
D. Salvage rights.
Profit cycles in manufacturing and retailing tend to be correct answers A. Demand driven.
b. Inelastic.
c. Like the insurance cycle.
d. Shielded from supply shock.
Which one of the following statements concerning claim status reports is true? correct answers a.
Claim status reports are not vital to an insurer because the reports are usually read only by
insurance department employees.
b. Claim status reports are not vital to an insurer because the reports are used only as a method of
illustrating work that needs to be done by the claims adjuster.
c. Claim status reports are vital to an insurer because the reports provide work for the claim
representatives, rounding out their written and verbal skills.
D. Claim status reports are vital to an insurer because the reports advise the insurer how the
claim is progressing on a periodic basis.
Underwriting management arranges treaty reinsurance to reinsure correct answers A. A group or
portfolio of insureds.
b. Insureds that do not meet underwriting guidelines.
c. All insurance of the primary insurer.
d. Individual accounts.
As surplus lines intermediaries, Lloyd's brokers have particular capabilities to perform their
market function. Which one of the following describes one of these capabilities? correct answers
a. Marketing programs for a broad range of specialized and unique risks
b. Niche marketing expertise to gain a competitive advantage
C. Knowing which syndicates and underwriters have expertise in the class of business for which
they are seeking coverage
d. Having reinsurance available for the accounts they broker
Stable Insurance Group, a surplus lines insurer, is considering granting binding authority to a
managing general agent (MGA). In deciding whether to grant binding authority to an MGA, a
surplus lines insurer will assess several factors. Which one of the following statements is correct
with respect to an MGA's financial condition? correct answers a. Surplus lines insurers typically
require MGAs to remit premiums as soon as they are collected rather than holding them and
remitting them at a later time.
b. An insurer generally seeks the same types of financial guarantees from all MGAs with which
it contracts.
, C. The MGA's financial condition is important because the insurer assumes a credit risk when
extending binding authority and responsibility for policy issuance.
d. Credit risk increases when the surplus lines MGA remits premiums to the insurer based on its
own booking records rather than those of the insurer.
Which one of the following statements is correct with respect to increased limits above the basic
coverage limits? correct answers a. Because increased limits losses are typically well
documented, they provide excellent data credibility.
B. Charges to increase commercial liability insurance limits frequently exceed 100 percent of the
charge for basic coverage limits.
c. Loss severity typically increases uniformly with increased coverage limits.
d. Higher limits can require a portion of the coverage to be reinsured, which reduces the insurer's
risk and hence the premium charged for the coverage.
Liabilities are claims against the organization's assets. Which one of the following best describes
a current liability? correct answers a. Deferred acquisition costs
B. Unpaid invoices from vendors
c. Treasury stock to be retired in six months
d. Unamortized portion of goodwill
Violet Insurance Company has a surplus share treaty with White Reinsurer and retains a line of
$50,000. The treaty contains five lines and provides for a maximum cession of $250,000. Violet
Insurance issues a policy insuring a building for $150,000 for a premium of $1,900 with one loss
of $60,000. What percentage of insurance, premiums, and losses is ceded to White Reinsurer?
correct answers a. 33.33%
b. 50%
C. 66.67%
d. 100%
Which one of the following best describes what is determined by the insurer's staff review of
applications from prospective insureds? correct answers a. Whether any loss control
recommendations will be made
b. Whether the account should be written as a personal insurance policy or a commercial
insurance policy
c. Whether claims will be paid or denied
D. Whether the characteristics of the customer match the insurer's eligibility and selection
criteria
Which one of the following is most important in developing and maintaining a successful surplus
lines insurance program? correct answers a. Familiarity with Insurance Services Office, Inc. rate
classifications
b. An aggressive pricing strategy
C. Extensive research and familiarity with the insured's business
d. General underwriting expertise rather than narrow specialization
The insurer's rights to recover and sell or otherwise dispose of insured property on which the
insurer has paid a total loss are called correct answers a. Fiduciary rights.
b. Constructive rights.
c. Catastrophe rights.
D. Salvage rights.
Profit cycles in manufacturing and retailing tend to be correct answers A. Demand driven.
b. Inelastic.
c. Like the insurance cycle.
d. Shielded from supply shock.
Which one of the following statements concerning claim status reports is true? correct answers a.
Claim status reports are not vital to an insurer because the reports are usually read only by
insurance department employees.
b. Claim status reports are not vital to an insurer because the reports are used only as a method of
illustrating work that needs to be done by the claims adjuster.
c. Claim status reports are vital to an insurer because the reports provide work for the claim
representatives, rounding out their written and verbal skills.
D. Claim status reports are vital to an insurer because the reports advise the insurer how the
claim is progressing on a periodic basis.
Underwriting management arranges treaty reinsurance to reinsure correct answers A. A group or
portfolio of insureds.
b. Insureds that do not meet underwriting guidelines.
c. All insurance of the primary insurer.
d. Individual accounts.
As surplus lines intermediaries, Lloyd's brokers have particular capabilities to perform their
market function. Which one of the following describes one of these capabilities? correct answers
a. Marketing programs for a broad range of specialized and unique risks
b. Niche marketing expertise to gain a competitive advantage
C. Knowing which syndicates and underwriters have expertise in the class of business for which
they are seeking coverage
d. Having reinsurance available for the accounts they broker
Stable Insurance Group, a surplus lines insurer, is considering granting binding authority to a
managing general agent (MGA). In deciding whether to grant binding authority to an MGA, a
surplus lines insurer will assess several factors. Which one of the following statements is correct
with respect to an MGA's financial condition? correct answers a. Surplus lines insurers typically
require MGAs to remit premiums as soon as they are collected rather than holding them and
remitting them at a later time.
b. An insurer generally seeks the same types of financial guarantees from all MGAs with which
it contracts.
, C. The MGA's financial condition is important because the insurer assumes a credit risk when
extending binding authority and responsibility for policy issuance.
d. Credit risk increases when the surplus lines MGA remits premiums to the insurer based on its
own booking records rather than those of the insurer.
Which one of the following statements is correct with respect to increased limits above the basic
coverage limits? correct answers a. Because increased limits losses are typically well
documented, they provide excellent data credibility.
B. Charges to increase commercial liability insurance limits frequently exceed 100 percent of the
charge for basic coverage limits.
c. Loss severity typically increases uniformly with increased coverage limits.
d. Higher limits can require a portion of the coverage to be reinsured, which reduces the insurer's
risk and hence the premium charged for the coverage.
Liabilities are claims against the organization's assets. Which one of the following best describes
a current liability? correct answers a. Deferred acquisition costs
B. Unpaid invoices from vendors
c. Treasury stock to be retired in six months
d. Unamortized portion of goodwill
Violet Insurance Company has a surplus share treaty with White Reinsurer and retains a line of
$50,000. The treaty contains five lines and provides for a maximum cession of $250,000. Violet
Insurance issues a policy insuring a building for $150,000 for a premium of $1,900 with one loss
of $60,000. What percentage of insurance, premiums, and losses is ceded to White Reinsurer?
correct answers a. 33.33%
b. 50%
C. 66.67%
d. 100%
Which one of the following best describes what is determined by the insurer's staff review of
applications from prospective insureds? correct answers a. Whether any loss control
recommendations will be made
b. Whether the account should be written as a personal insurance policy or a commercial
insurance policy
c. Whether claims will be paid or denied
D. Whether the characteristics of the customer match the insurer's eligibility and selection
criteria
Which one of the following is most important in developing and maintaining a successful surplus
lines insurance program? correct answers a. Familiarity with Insurance Services Office, Inc. rate
classifications
b. An aggressive pricing strategy
C. Extensive research and familiarity with the insured's business
d. General underwriting expertise rather than narrow specialization
