ARM 402 Exam Guaranteed to Boost Your
Grades Tested and Proven Exam
Strategies EXAMS FROM THE BEST
INSTITUTIONS ACROSS THE GLOBE
Each of the risk control techniques of duplication, separation, and diversification A.
Decrease the frequency of losses incurred by an organization.
B. Reduce the severity of loss associated with the organization's loss exposures.
C. Cause losses to be less predictable but more manageable.
D. Work in combination to transfer the organization's loss exposures. - -correct ans- -B
Cold Coolers, Inc., has its main warehouse in St. Louis. It also stores inventory in two
warehouses in other cities to reduce the distance between their warehouses and retail
locations. Cold Coolers is using which one of the following risk management techniques? A.
Risk transfer
B. Separation
C. Duplication
D. Diversification - -correct ans- -B
Which one of the following risk control techniques might actually increase loss frequency?
A. Separation
B. Diversification
C. Loss reduction
D. Loss prevention - -correct ans- -A
An organization that operates warehouses in two locations is using the risk control technique
of
,A. Separation.
B. Loss prevention.
C. Duplication.
D. Diversification. - -correct ans- -A
Due to fierce local competition, the CEO of Apex Manufacturing is planning to expand into
other geographical markets. Which one of the following risk control techniques, dealing
primarily with business risk, is the CEO applying?
A. Diversification
B. Segregation
C. Separation
D. Duplication - -correct ans- -A
Which one of the following statements describing following form excess liability insurance is
most accurate?
A. The deductibles in the following form excess liability policy make it more similar to
an umbrella liability policy than a true excess liability policy.
B. In its purest state, a following form excess liability policy is nothing more than an
increase in limits to the primary policy.
C. The following form excess liability policy usually provides fewer exclusions than the
primary policy, leading to coverage that is broader in scope.
D. The following form excess liability policy must be issued by the same insurer that
issued the primary policy. - -correct ans- -B
PassPorts Company is a rapidly-expanding international shipping company based in the U.S.
In some foreign countries where it operates, it does not have a permanent office or place of
business. Sometimes the company's operations consist of an employee with a laptop
computer working out of a hotel room. To insure its loss exposures in such cases, PassPorts
purchases a nonadmitted insurance policy combining coverage for liability, personal property,
rented vehicles, and foreign voluntary workers compensation all in one policy. This policy is
A. An exporters package policy.
, B. A difference in conditions insurance policy.
C. A commercial multi-peril policy.
D. A finite insurance policy. - -correct ans- -A
The ceding commission is paid by
A. The reinsurer to the reinsurance broker.
B. The ceding company to the reinsurance broker.
C. The reinsurance broker to the reinsurer.
D. The reinsurer to the ceding company. - -correct ans- -D
A following-form excess liability policy is an excess liability policy that A.
Provides broad coverage in excess of a self-insured retention.
B. Requires the insured to retain a specified amount of loss from the first dollar during a
specified period of time.
C. Does not depend on the provisions of the underlying policy for determining the
scope of the coverage.
D. Covers a claim in excess of the underlying limits only if the loss is covered by the
underlying insurance. - -correct ans- -D
Which one of the following statements is correct regarding the master policy in a controlled
master program?
A. The master policy covers all of the insured's international operations on a blanket
basis helping to prevent a coverage gap.
B. The master policy covers the foreign subsidiaries of a business and is purchased in
the local insurance market of the foreign country.
C. The master policy is an admitted policy purchased in the country where the parent
company is domiciled.
D. The master policy provides coverage for excess losses for the entire multinational
portfolio. - -correct ans- -A
Grades Tested and Proven Exam
Strategies EXAMS FROM THE BEST
INSTITUTIONS ACROSS THE GLOBE
Each of the risk control techniques of duplication, separation, and diversification A.
Decrease the frequency of losses incurred by an organization.
B. Reduce the severity of loss associated with the organization's loss exposures.
C. Cause losses to be less predictable but more manageable.
D. Work in combination to transfer the organization's loss exposures. - -correct ans- -B
Cold Coolers, Inc., has its main warehouse in St. Louis. It also stores inventory in two
warehouses in other cities to reduce the distance between their warehouses and retail
locations. Cold Coolers is using which one of the following risk management techniques? A.
Risk transfer
B. Separation
C. Duplication
D. Diversification - -correct ans- -B
Which one of the following risk control techniques might actually increase loss frequency?
A. Separation
B. Diversification
C. Loss reduction
D. Loss prevention - -correct ans- -A
An organization that operates warehouses in two locations is using the risk control technique
of
,A. Separation.
B. Loss prevention.
C. Duplication.
D. Diversification. - -correct ans- -A
Due to fierce local competition, the CEO of Apex Manufacturing is planning to expand into
other geographical markets. Which one of the following risk control techniques, dealing
primarily with business risk, is the CEO applying?
A. Diversification
B. Segregation
C. Separation
D. Duplication - -correct ans- -A
Which one of the following statements describing following form excess liability insurance is
most accurate?
A. The deductibles in the following form excess liability policy make it more similar to
an umbrella liability policy than a true excess liability policy.
B. In its purest state, a following form excess liability policy is nothing more than an
increase in limits to the primary policy.
C. The following form excess liability policy usually provides fewer exclusions than the
primary policy, leading to coverage that is broader in scope.
D. The following form excess liability policy must be issued by the same insurer that
issued the primary policy. - -correct ans- -B
PassPorts Company is a rapidly-expanding international shipping company based in the U.S.
In some foreign countries where it operates, it does not have a permanent office or place of
business. Sometimes the company's operations consist of an employee with a laptop
computer working out of a hotel room. To insure its loss exposures in such cases, PassPorts
purchases a nonadmitted insurance policy combining coverage for liability, personal property,
rented vehicles, and foreign voluntary workers compensation all in one policy. This policy is
A. An exporters package policy.
, B. A difference in conditions insurance policy.
C. A commercial multi-peril policy.
D. A finite insurance policy. - -correct ans- -A
The ceding commission is paid by
A. The reinsurer to the reinsurance broker.
B. The ceding company to the reinsurance broker.
C. The reinsurance broker to the reinsurer.
D. The reinsurer to the ceding company. - -correct ans- -D
A following-form excess liability policy is an excess liability policy that A.
Provides broad coverage in excess of a self-insured retention.
B. Requires the insured to retain a specified amount of loss from the first dollar during a
specified period of time.
C. Does not depend on the provisions of the underlying policy for determining the
scope of the coverage.
D. Covers a claim in excess of the underlying limits only if the loss is covered by the
underlying insurance. - -correct ans- -D
Which one of the following statements is correct regarding the master policy in a controlled
master program?
A. The master policy covers all of the insured's international operations on a blanket
basis helping to prevent a coverage gap.
B. The master policy covers the foreign subsidiaries of a business and is purchased in
the local insurance market of the foreign country.
C. The master policy is an admitted policy purchased in the country where the parent
company is domiciled.
D. The master policy provides coverage for excess losses for the entire multinational
portfolio. - -correct ans- -A
