ARM 402 FINAL EXAM 2026 BANK 2
VERSIONS AND STUDY GUIDE EXAM
CURRENTLY TESTING COMPLETE
ACTUAL EXAM QUESTIONS WITH
DETAILED VERIFIED ANSWERS
EXPERTLY VERIFIED /ALREADY GRADED
A+//BRAND NEW!!
Pools are well-suited for organizations that
A. Are looking to transfer risk.
B. Have little or no excess loss exposure.
C. Have operations in multiple states.
D. Are too small to form a captive insurer. -
....ANSWER...D
Among the properties owned by Hagen Company are five
buildings constructed from cement blocks. Hagen did not
include these buildings for coverage under its property
insurance policy because losses to these structures occur so
infrequently. When losses do occur, Hagen Company
simply pays for the losses through cash flow or current
assets. Hagen's method of dealing with losses to these
buildings is called
A. Self insurance.
1
,B. Group self insurance.
C. Third-party administered plan.
D. Informal retention. - ....ANSWER...D
The level at which each individual accident or occurrence
is limited for the purpose of calculating a retrospective
rating insurance premium is the
A. Increased limit.
B. Loss conversion factor.
2
,C. Minimum premium limit.
D. Loss limit. - ....ANSWER...D
A rating plan that adjusts the premium for the current
policy period to recognize the loss experience of the insured
organization during past policy periods is
A. An experience rating plan.
B. A maximum premium rating plan.
C. A retrospective rating plan.
D. A finite insurance rating plan. - ....ANSWER...A
One major advantage of self-insurance is that it
A. Provides a more cost-effective method to manage losses
than a risk management program.
B. Allows an organization to exercise direct control
over claim settlement.
C. Has higher long-run costs that are offset by reductions
in taxes.
D. Reduces the need to use present value analysis in cost-
benefit calculations. - ....ANSWER...B
3
, Brook Insurance has a 5-line surplus share treaty with
Cedars Reinsurance. The line is $100,000. Brook Insurance
has the following policies:
Limit PremiumLoss Policy A$50,000 $1,000 $1,000 Policy
B $400,000 $4,000 $50,000 Policy C $800,000 $16,000
$100,000
How much of the premium for Policy B will Brook
Insurance cede to Cedars Reinsurance?
A. $800
B. $1,000
C. $3,000
D. $3,200 - ....ANSWER...C: 100,000 is retained and
300,000 is ceded; 300,000 ÷ 400,000 limit = .75; 4,000 × .75
= 3,000. Brook Insurance will cede $3,000 of the premium
for Policy B to Cedars Reinsurance.
An amusement park ride malfunctioned, injuring four
individuals. ABC Insurer, the general liability insurer for
the both the amusement park and the ride manufacturer,
paid each of the four individuals $500,000 under the
amusement park's policy and paid each of the four
individuals $250,000 under the ride manufacturer's policy.
ABC has a $5 million xs $200,000 per occurrence excess of
4
VERSIONS AND STUDY GUIDE EXAM
CURRENTLY TESTING COMPLETE
ACTUAL EXAM QUESTIONS WITH
DETAILED VERIFIED ANSWERS
EXPERTLY VERIFIED /ALREADY GRADED
A+//BRAND NEW!!
Pools are well-suited for organizations that
A. Are looking to transfer risk.
B. Have little or no excess loss exposure.
C. Have operations in multiple states.
D. Are too small to form a captive insurer. -
....ANSWER...D
Among the properties owned by Hagen Company are five
buildings constructed from cement blocks. Hagen did not
include these buildings for coverage under its property
insurance policy because losses to these structures occur so
infrequently. When losses do occur, Hagen Company
simply pays for the losses through cash flow or current
assets. Hagen's method of dealing with losses to these
buildings is called
A. Self insurance.
1
,B. Group self insurance.
C. Third-party administered plan.
D. Informal retention. - ....ANSWER...D
The level at which each individual accident or occurrence
is limited for the purpose of calculating a retrospective
rating insurance premium is the
A. Increased limit.
B. Loss conversion factor.
2
,C. Minimum premium limit.
D. Loss limit. - ....ANSWER...D
A rating plan that adjusts the premium for the current
policy period to recognize the loss experience of the insured
organization during past policy periods is
A. An experience rating plan.
B. A maximum premium rating plan.
C. A retrospective rating plan.
D. A finite insurance rating plan. - ....ANSWER...A
One major advantage of self-insurance is that it
A. Provides a more cost-effective method to manage losses
than a risk management program.
B. Allows an organization to exercise direct control
over claim settlement.
C. Has higher long-run costs that are offset by reductions
in taxes.
D. Reduces the need to use present value analysis in cost-
benefit calculations. - ....ANSWER...B
3
, Brook Insurance has a 5-line surplus share treaty with
Cedars Reinsurance. The line is $100,000. Brook Insurance
has the following policies:
Limit PremiumLoss Policy A$50,000 $1,000 $1,000 Policy
B $400,000 $4,000 $50,000 Policy C $800,000 $16,000
$100,000
How much of the premium for Policy B will Brook
Insurance cede to Cedars Reinsurance?
A. $800
B. $1,000
C. $3,000
D. $3,200 - ....ANSWER...C: 100,000 is retained and
300,000 is ceded; 300,000 ÷ 400,000 limit = .75; 4,000 × .75
= 3,000. Brook Insurance will cede $3,000 of the premium
for Policy B to Cedars Reinsurance.
An amusement park ride malfunctioned, injuring four
individuals. ABC Insurer, the general liability insurer for
the both the amusement park and the ride manufacturer,
paid each of the four individuals $500,000 under the
amusement park's policy and paid each of the four
individuals $250,000 under the ride manufacturer's policy.
ABC has a $5 million xs $200,000 per occurrence excess of
4
