AFSB 151 UPDATED ACTUAL QUESTIONS WITH
CORRECT ANSWERS
Question 1.
Hazardous waste removal bonds
ANSWER
A miscellaneous bond that guarantee compliance with EPA and state laws for the closure and
post-closure care of hazardous waste facilities.
Question 2.
Statutory law
ANSWER
The formal laws, or statutes, enacted by federal, state, or local legislative bodies.
Question 3.
Maintenance clause
ANSWER
AKA warranty clause. A contract provision that guarantees the fitness of the work.
Question 4.
Limited cosurety agreements
ANSWER
The maximum amount an oblige might collect from any one of the cosureties
Question 5.
Injunction bonds
ANSWER
A classification of bonds that guarantee the plaintiff will indemnify the defendant against a loss
if a court decides the injunction should not have been granted. (judicial/litigation)
,Question 6.
Portfolio reinsurance
ANSWER
Reinsurance that transfers to the reinsurer liability for an entire type of insurance, territory, or
book of business after the primary insurer has issued the policies.
Question 7.
Facultative certificate of reinsurance
ANSWER
An agreement that defines the terms of the facultative reinsurance coverage on a specific loss
exposure.
Question 8.
Contract surety bonds
ANSWER
A classification of bonds that guarantee the performance of the bonded contractor.
Question 9.
Excess of loss reinsurance
ANSWER
A type of reinsurance in which the primary insurer is indemnified for losses that exceed a
specified dollar amount. AKA Nonproportional reinsurance.
Question 10.
Backlog or work on hand
ANSWER
The balance of work to be performed on uncompleted contracts, or the estimated cost to
complete the work outstanding, or the amount yet to be billed. AKA unfinished work.
,Question 11.
License and permit bonds
ANSWER
Surety bonds that provide payment to the oblige (the state, city, or other public entity) for loss
or damage resulting from violations of the duties and obligations imposed on the licensee or
permit holder. (Statutory Bond meaning not cancellable)
Question 12.
Merchandising and dealer bonds
ANSWER
A classification of bonds that guarantee that merchandising activities will be conducted
according to law. (license and permit)
Question 13.
Current liabilities
ANSWER
A balance sheet liability classification that includes obligations whose payments are reasonably
expected to require the use of cash or the creation of other current liabilities within one year.
Question 14.
Attachment bonds
ANSWER
A judicial bond guaranteeing that, if the court decides against a plaintiff who has requested
attachment of the defendant's property, the defendant will be paid any damages that result
from the property attachment.
Question 15.
Retrocedent
ANSWER
The reinsurer that transfers or cedes all or part of the insurance risk it has assumed to another
reinsurer.
, Question 16.
Adverse selection
ANSWER
The decision to reinsure those loss exposures that have an increased probability of loss
because the retention of those loss exposure is undesirable.
Question 17.
Judicial bonds
ANSWER
A court bond that is posted by a plaintiff or a defendant (the principal) in a court case to
protect the opposing party in the event that the principal does not prevail in the court action.
Question 18.
Joint control
ANSWER
Fiduciary bonds have this because both the Surety and the fiduciary have control of the assets.
Question 19.
Fiduciary
ANSWER
A person or entity that holds a position of trust, manages another person's or entity's affairs or
funds, and has a duty to that person or entity to act in a trustworthy manner.
Question 20.
Chapter 12
ANSWER
A chapter of the federal bankruptcy act giving farm operations, other than large corporate
farms, the same reorganization opportunities available to corporations and partnerships under
chapter 11.
CORRECT ANSWERS
Question 1.
Hazardous waste removal bonds
ANSWER
A miscellaneous bond that guarantee compliance with EPA and state laws for the closure and
post-closure care of hazardous waste facilities.
Question 2.
Statutory law
ANSWER
The formal laws, or statutes, enacted by federal, state, or local legislative bodies.
Question 3.
Maintenance clause
ANSWER
AKA warranty clause. A contract provision that guarantees the fitness of the work.
Question 4.
Limited cosurety agreements
ANSWER
The maximum amount an oblige might collect from any one of the cosureties
Question 5.
Injunction bonds
ANSWER
A classification of bonds that guarantee the plaintiff will indemnify the defendant against a loss
if a court decides the injunction should not have been granted. (judicial/litigation)
,Question 6.
Portfolio reinsurance
ANSWER
Reinsurance that transfers to the reinsurer liability for an entire type of insurance, territory, or
book of business after the primary insurer has issued the policies.
Question 7.
Facultative certificate of reinsurance
ANSWER
An agreement that defines the terms of the facultative reinsurance coverage on a specific loss
exposure.
Question 8.
Contract surety bonds
ANSWER
A classification of bonds that guarantee the performance of the bonded contractor.
Question 9.
Excess of loss reinsurance
ANSWER
A type of reinsurance in which the primary insurer is indemnified for losses that exceed a
specified dollar amount. AKA Nonproportional reinsurance.
Question 10.
Backlog or work on hand
ANSWER
The balance of work to be performed on uncompleted contracts, or the estimated cost to
complete the work outstanding, or the amount yet to be billed. AKA unfinished work.
,Question 11.
License and permit bonds
ANSWER
Surety bonds that provide payment to the oblige (the state, city, or other public entity) for loss
or damage resulting from violations of the duties and obligations imposed on the licensee or
permit holder. (Statutory Bond meaning not cancellable)
Question 12.
Merchandising and dealer bonds
ANSWER
A classification of bonds that guarantee that merchandising activities will be conducted
according to law. (license and permit)
Question 13.
Current liabilities
ANSWER
A balance sheet liability classification that includes obligations whose payments are reasonably
expected to require the use of cash or the creation of other current liabilities within one year.
Question 14.
Attachment bonds
ANSWER
A judicial bond guaranteeing that, if the court decides against a plaintiff who has requested
attachment of the defendant's property, the defendant will be paid any damages that result
from the property attachment.
Question 15.
Retrocedent
ANSWER
The reinsurer that transfers or cedes all or part of the insurance risk it has assumed to another
reinsurer.
, Question 16.
Adverse selection
ANSWER
The decision to reinsure those loss exposures that have an increased probability of loss
because the retention of those loss exposure is undesirable.
Question 17.
Judicial bonds
ANSWER
A court bond that is posted by a plaintiff or a defendant (the principal) in a court case to
protect the opposing party in the event that the principal does not prevail in the court action.
Question 18.
Joint control
ANSWER
Fiduciary bonds have this because both the Surety and the fiduciary have control of the assets.
Question 19.
Fiduciary
ANSWER
A person or entity that holds a position of trust, manages another person's or entity's affairs or
funds, and has a duty to that person or entity to act in a trustworthy manner.
Question 20.
Chapter 12
ANSWER
A chapter of the federal bankruptcy act giving farm operations, other than large corporate
farms, the same reorganization opportunities available to corporations and partnerships under
chapter 11.
