Certificate in London Market Insurance Specialisation Exam
Questions With Answers and Explanations
Question 1. A complex property fire requires site investigation, causation work and valuation of damage.
Which action best reflects sound London Market practice?
A. Verify the operative policy and coverage terms before making a liability commitment
B. Appoint a suitably qualified loss adjuster with a clear scope of instruction
C. Protect and account for salvage rights and value as part of the claim settlement
D. Record the notification promptly, capture essential facts and route it to the appropriate insurers and claims handlers
Correct Answer: B. Appoint a suitably qualified loss adjuster with a clear scope of instruction
Explanation: Appoint a suitably qualified loss adjuster with a clear scope of instruction. This applies the concept of Loss
adjuster because it is an independent or insurer-appointed specialist who investigates the circumstances and quantum of a
loss and reports to the instructing party. The competing choices apply different concepts from Claims Handling and do not
address the specific fact pattern as directly. The concept supports fair, timely and evidence-based claims decisions while
preserving coverage and recovery rights.
Question 2. A cargo policy values shipments at invoice cost plus freight plus 10 percent. What is the best
course of action?
A. Explain that Clause C is limited to its specified perils and does not operate as broad all-risks cover
B. Recognize a potential general-average act and preserve the documentation and security needed for contribution
C. Use the contractual valuation formula rather than substituting an unrelated market value after the loss
D. Consider appropriate P&I cover for the shipowner's maritime third-party liabilities
Correct Answer: C. Use the contractual valuation formula rather than substituting an unrelated market value after
the loss
Explanation: Use the contractual valuation formula rather than substituting an unrelated market value after the loss. This
applies the concept of Cargo valuation because it is the agreed or policy-defined basis used to determine insured value,
often incorporating invoice cost, freight and an agreed uplift. The competing choices apply different concepts from Marine
Cargo and Hull and do not address the specific fact pattern as directly. Marine terms have specific effects on coverage,
valuation, loss sharing and the rights of maritime interests.
Question 3. A defective appliance allegedly causes a house fire after sale. What is the best course of action?
A. Check whether Side C entity coverage applies to the securities claim under the policy definition
B. Evaluate Side A coverage for the individual's non-indemnifiable loss
C. Consider the employer's potential vicarious liability alongside the individual's negligence
D. Analyse the claim under products-liability coverage and the policy's territorial and jurisdiction terms
Correct Answer: D. Analyse the claim under products-liability coverage and the policy's territorial and
jurisdiction terms
Explanation: Analyse the claim under products-liability coverage and the policy's territorial and jurisdiction terms. This
applies the concept of Products liability because it is cover for legal liability arising from injury or damage caused by products
supplied, sold or manufactured by the insured. The competing choices apply different concepts from Liability and Financial
Lines and do not address the specific fact pattern as directly. Trigger, limit and insuring-agreement distinctions determine
which policy period and coverage section may respond to a liability claim.
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,Certificate in London Market Insurance Specialisation Exam
Question 4. An old proposal form states that every answer is the basis of the contract and therefore
automatically a warranty. Which action best reflects sound London Market practice?
A. Consider the statutory proportionate claims adjustment that reflects the premium the insurer would actually have
charged
B. Evaluate the breach as potentially deliberate or reckless and apply the statutory remedy rather than a simple
innocent-error approach
C. Assess whether the presentation was clear and substantially complete rather than assuming that raw volume alone
satisfies the duty
D. Do not treat the basis clause as creating warranties where the statutory abolition applies
Correct Answer: D. Do not treat the basis clause as creating warranties where the statutory abolition applies
Explanation: Do not treat the basis clause as creating warranties where the statutory abolition applies. This applies the
concept of Basis of contract clause because it is a clause that historically converted pre-contract statements into warranties,
a practice abolished for non-consumer insurance by the Insurance Act 2015. The competing choices apply different concepts
from Insurance Principles and Contract Law and do not address the specific fact pattern as directly. The distinction matters
because contract rights, disclosure duties, remedies and claim outcomes depend on the exact legal concept involved.
Question 5. An examination question describes the professional expectation to communicate and transact
honestly, clearly and without misleading clients or counterparties. Which answer identifies the concept?
A. Audit trail
B. Storage limitation
C. Confidentiality
D. Fair dealing
Correct Answer: D. Fair dealing
Explanation: Fair dealing is the professional expectation to communicate and transact honestly, clearly and without
misleading clients or counterparties. This makes it the best match for the description in the question. The other choices name
different concepts within Professional Conduct, Data and Ethics and perform different functions. Professional controls protect
clients, counterparties and market integrity by making decisions transparent, secure, competent and properly authorised.
Question 6. Which of the following is the best name for cover for financial loss following insured damage to
energy assets, often requiring detailed modelling of production, margins and repair times?
A. Energy business interruption
B. Satellite insurance
C. Offshore construction cover
D. Upstream energy
Correct Answer: A. Energy business interruption
Explanation: Energy business interruption is cover for financial loss following insured damage to energy assets, often
requiring detailed modelling of production, margins and repair times. This makes it the best match for the description in the
question. The other choices name different concepts within Aviation and Energy Insurance and perform different functions.
Specialist terminology matters because aviation and energy risks can combine high severity, complex operations and
bespoke coverage structures.
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,Certificate in London Market Insurance Specialisation Exam
Question 7. In London Market practice, what is the correct term for cyber insurance treatment of extortion
demands and related response costs, subject to exclusions, sanctions, legality and policy conditions?
A. Contingency insurance
B. Ransomware coverage
C. Surety bond
D. Environmental liability insurance
Correct Answer: B. Ransomware coverage
Explanation: Ransomware coverage is cyber insurance treatment of extortion demands and related response costs, subject
to exclusions, sanctions, legality and policy conditions. This makes it the best match for the description in the question. The
other choices name different concepts within Specialty Insurance and perform different functions. Specialty covers address
narrowly defined exposures, so the trigger, subject matter and exclusions must match the client's actual risk.
Question 8. In London Market practice, what is the correct term for cover for high-value portable assets such
as precious metals, cash, securities or jewels in specified locations or transit?
A. Erection all risks
B. Trade credit insurance
C. Cyber third-party liability
D. Specie insurance
Correct Answer: D. Specie insurance
Explanation: Specie insurance is cover for high-value portable assets such as precious metals, cash, securities or jewels in
specified locations or transit. This makes it the best match for the description in the question. The other choices name
different concepts within Specialty Insurance and perform different functions. Specialty covers address narrowly defined
exposures, so the trigger, subject matter and exclusions must match the client's actual risk.
Question 9. In London Market practice, what is the correct term for the recording and exchange of policy-level
premium, commission, tax and claims information needed to support market settlement and financial
reporting?
A. Technical accounting
B. Insurance premium tax
C. Brokerage deduction
D. Cash settlement
Correct Answer: A. Technical accounting
Explanation: Technical accounting is the recording and exchange of policy-level premium, commission, tax and claims
information needed to support market settlement and financial reporting. This makes it the best match for the description in
the question. The other choices name different concepts within Market Operations and Insurance Accounting and perform
different functions. Accurate accounting concepts are essential for reconciling premium, cash, tax, commission and claims
across multiple market parties.
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, Certificate in London Market Insurance Specialisation Exam
Question 10. Which of the following is the best name for tax imposed by a jurisdiction on insurance
premiums based on risk location, class and local rules?
A. Territorial limit
B. Admitted insurance
C. Local premium tax
D. Fronting
Correct Answer: C. Local premium tax
Explanation: Local premium tax is tax imposed by a jurisdiction on insurance premiums based on risk location, class and
local rules. This makes it the best match for the description in the question. The other choices name different concepts within
International Programmes and Cross-Border Business and perform different functions. Cross-border structures must
coordinate coverage with local licensing, tax, compulsory-insurance and contract-law requirements.
Question 11. Which of the following is the best name for a notice preserving an insurer's ability to rely on
coverage defences while it investigates or handles a claim without conceding liability?
A. Claims file
B. Reservation of rights
C. Subrogation recovery
D. Contribution claim
Correct Answer: B. Reservation of rights
Explanation: Reservation of rights is a notice preserving an insurer's ability to rely on coverage defences while it
investigates or handles a claim without conceding liability. This makes it the best match for the description in the question.
The other choices name different concepts within Claims Handling and perform different functions. The concept supports fair,
timely and evidence-based claims decisions while preserving coverage and recovery rights.
Question 12. Surveyors identify missing automatic shutdown controls at a high-hazard plant. What is the best
course of action?
A. Obtain the exposure information needed to understand how much can be lost and where it is concentrated
B. Select based on the underlying risk characteristics and expected return, not premium volume alone
C. Agree, monitor and document appropriate risk-improvement requirements and any effect on terms
D. Track cumulative payments and remaining aggregate before agreeing later settlements
Correct Answer: C. Agree, monitor and document appropriate risk-improvement requirements and any effect on
terms
Explanation: Agree, monitor and document appropriate risk-improvement requirements and any effect on terms. This
applies the concept of Risk improvement because it is a measure requested or recommended to reduce the probability or
severity of loss, such as improved fire protection. The competing choices apply different concepts from Underwriting
Fundamentals and do not address the specific fact pattern as directly. Using the concept correctly supports disciplined risk
selection, authority control, pricing and accumulation management.
Page 4
Questions With Answers and Explanations
Question 1. A complex property fire requires site investigation, causation work and valuation of damage.
Which action best reflects sound London Market practice?
A. Verify the operative policy and coverage terms before making a liability commitment
B. Appoint a suitably qualified loss adjuster with a clear scope of instruction
C. Protect and account for salvage rights and value as part of the claim settlement
D. Record the notification promptly, capture essential facts and route it to the appropriate insurers and claims handlers
Correct Answer: B. Appoint a suitably qualified loss adjuster with a clear scope of instruction
Explanation: Appoint a suitably qualified loss adjuster with a clear scope of instruction. This applies the concept of Loss
adjuster because it is an independent or insurer-appointed specialist who investigates the circumstances and quantum of a
loss and reports to the instructing party. The competing choices apply different concepts from Claims Handling and do not
address the specific fact pattern as directly. The concept supports fair, timely and evidence-based claims decisions while
preserving coverage and recovery rights.
Question 2. A cargo policy values shipments at invoice cost plus freight plus 10 percent. What is the best
course of action?
A. Explain that Clause C is limited to its specified perils and does not operate as broad all-risks cover
B. Recognize a potential general-average act and preserve the documentation and security needed for contribution
C. Use the contractual valuation formula rather than substituting an unrelated market value after the loss
D. Consider appropriate P&I cover for the shipowner's maritime third-party liabilities
Correct Answer: C. Use the contractual valuation formula rather than substituting an unrelated market value after
the loss
Explanation: Use the contractual valuation formula rather than substituting an unrelated market value after the loss. This
applies the concept of Cargo valuation because it is the agreed or policy-defined basis used to determine insured value,
often incorporating invoice cost, freight and an agreed uplift. The competing choices apply different concepts from Marine
Cargo and Hull and do not address the specific fact pattern as directly. Marine terms have specific effects on coverage,
valuation, loss sharing and the rights of maritime interests.
Question 3. A defective appliance allegedly causes a house fire after sale. What is the best course of action?
A. Check whether Side C entity coverage applies to the securities claim under the policy definition
B. Evaluate Side A coverage for the individual's non-indemnifiable loss
C. Consider the employer's potential vicarious liability alongside the individual's negligence
D. Analyse the claim under products-liability coverage and the policy's territorial and jurisdiction terms
Correct Answer: D. Analyse the claim under products-liability coverage and the policy's territorial and
jurisdiction terms
Explanation: Analyse the claim under products-liability coverage and the policy's territorial and jurisdiction terms. This
applies the concept of Products liability because it is cover for legal liability arising from injury or damage caused by products
supplied, sold or manufactured by the insured. The competing choices apply different concepts from Liability and Financial
Lines and do not address the specific fact pattern as directly. Trigger, limit and insuring-agreement distinctions determine
which policy period and coverage section may respond to a liability claim.
Page 1
,Certificate in London Market Insurance Specialisation Exam
Question 4. An old proposal form states that every answer is the basis of the contract and therefore
automatically a warranty. Which action best reflects sound London Market practice?
A. Consider the statutory proportionate claims adjustment that reflects the premium the insurer would actually have
charged
B. Evaluate the breach as potentially deliberate or reckless and apply the statutory remedy rather than a simple
innocent-error approach
C. Assess whether the presentation was clear and substantially complete rather than assuming that raw volume alone
satisfies the duty
D. Do not treat the basis clause as creating warranties where the statutory abolition applies
Correct Answer: D. Do not treat the basis clause as creating warranties where the statutory abolition applies
Explanation: Do not treat the basis clause as creating warranties where the statutory abolition applies. This applies the
concept of Basis of contract clause because it is a clause that historically converted pre-contract statements into warranties,
a practice abolished for non-consumer insurance by the Insurance Act 2015. The competing choices apply different concepts
from Insurance Principles and Contract Law and do not address the specific fact pattern as directly. The distinction matters
because contract rights, disclosure duties, remedies and claim outcomes depend on the exact legal concept involved.
Question 5. An examination question describes the professional expectation to communicate and transact
honestly, clearly and without misleading clients or counterparties. Which answer identifies the concept?
A. Audit trail
B. Storage limitation
C. Confidentiality
D. Fair dealing
Correct Answer: D. Fair dealing
Explanation: Fair dealing is the professional expectation to communicate and transact honestly, clearly and without
misleading clients or counterparties. This makes it the best match for the description in the question. The other choices name
different concepts within Professional Conduct, Data and Ethics and perform different functions. Professional controls protect
clients, counterparties and market integrity by making decisions transparent, secure, competent and properly authorised.
Question 6. Which of the following is the best name for cover for financial loss following insured damage to
energy assets, often requiring detailed modelling of production, margins and repair times?
A. Energy business interruption
B. Satellite insurance
C. Offshore construction cover
D. Upstream energy
Correct Answer: A. Energy business interruption
Explanation: Energy business interruption is cover for financial loss following insured damage to energy assets, often
requiring detailed modelling of production, margins and repair times. This makes it the best match for the description in the
question. The other choices name different concepts within Aviation and Energy Insurance and perform different functions.
Specialist terminology matters because aviation and energy risks can combine high severity, complex operations and
bespoke coverage structures.
Page 2
,Certificate in London Market Insurance Specialisation Exam
Question 7. In London Market practice, what is the correct term for cyber insurance treatment of extortion
demands and related response costs, subject to exclusions, sanctions, legality and policy conditions?
A. Contingency insurance
B. Ransomware coverage
C. Surety bond
D. Environmental liability insurance
Correct Answer: B. Ransomware coverage
Explanation: Ransomware coverage is cyber insurance treatment of extortion demands and related response costs, subject
to exclusions, sanctions, legality and policy conditions. This makes it the best match for the description in the question. The
other choices name different concepts within Specialty Insurance and perform different functions. Specialty covers address
narrowly defined exposures, so the trigger, subject matter and exclusions must match the client's actual risk.
Question 8. In London Market practice, what is the correct term for cover for high-value portable assets such
as precious metals, cash, securities or jewels in specified locations or transit?
A. Erection all risks
B. Trade credit insurance
C. Cyber third-party liability
D. Specie insurance
Correct Answer: D. Specie insurance
Explanation: Specie insurance is cover for high-value portable assets such as precious metals, cash, securities or jewels in
specified locations or transit. This makes it the best match for the description in the question. The other choices name
different concepts within Specialty Insurance and perform different functions. Specialty covers address narrowly defined
exposures, so the trigger, subject matter and exclusions must match the client's actual risk.
Question 9. In London Market practice, what is the correct term for the recording and exchange of policy-level
premium, commission, tax and claims information needed to support market settlement and financial
reporting?
A. Technical accounting
B. Insurance premium tax
C. Brokerage deduction
D. Cash settlement
Correct Answer: A. Technical accounting
Explanation: Technical accounting is the recording and exchange of policy-level premium, commission, tax and claims
information needed to support market settlement and financial reporting. This makes it the best match for the description in
the question. The other choices name different concepts within Market Operations and Insurance Accounting and perform
different functions. Accurate accounting concepts are essential for reconciling premium, cash, tax, commission and claims
across multiple market parties.
Page 3
, Certificate in London Market Insurance Specialisation Exam
Question 10. Which of the following is the best name for tax imposed by a jurisdiction on insurance
premiums based on risk location, class and local rules?
A. Territorial limit
B. Admitted insurance
C. Local premium tax
D. Fronting
Correct Answer: C. Local premium tax
Explanation: Local premium tax is tax imposed by a jurisdiction on insurance premiums based on risk location, class and
local rules. This makes it the best match for the description in the question. The other choices name different concepts within
International Programmes and Cross-Border Business and perform different functions. Cross-border structures must
coordinate coverage with local licensing, tax, compulsory-insurance and contract-law requirements.
Question 11. Which of the following is the best name for a notice preserving an insurer's ability to rely on
coverage defences while it investigates or handles a claim without conceding liability?
A. Claims file
B. Reservation of rights
C. Subrogation recovery
D. Contribution claim
Correct Answer: B. Reservation of rights
Explanation: Reservation of rights is a notice preserving an insurer's ability to rely on coverage defences while it
investigates or handles a claim without conceding liability. This makes it the best match for the description in the question.
The other choices name different concepts within Claims Handling and perform different functions. The concept supports fair,
timely and evidence-based claims decisions while preserving coverage and recovery rights.
Question 12. Surveyors identify missing automatic shutdown controls at a high-hazard plant. What is the best
course of action?
A. Obtain the exposure information needed to understand how much can be lost and where it is concentrated
B. Select based on the underlying risk characteristics and expected return, not premium volume alone
C. Agree, monitor and document appropriate risk-improvement requirements and any effect on terms
D. Track cumulative payments and remaining aggregate before agreeing later settlements
Correct Answer: C. Agree, monitor and document appropriate risk-improvement requirements and any effect on
terms
Explanation: Agree, monitor and document appropriate risk-improvement requirements and any effect on terms. This
applies the concept of Risk improvement because it is a measure requested or recommended to reduce the probability or
severity of loss, such as improved fire protection. The competing choices apply different concepts from Underwriting
Fundamentals and do not address the specific fact pattern as directly. Using the concept correctly supports disciplined risk
selection, authority control, pricing and accumulation management.
Page 4
