CPCU 520 EXAM WITH COMPLETE SOLUTIONS 100%
ACCURATE!!
Blithe Insurance Company was found to be insolvent following the hurricane and the
guaranty fund took over for the state. Which one of the following is most likely to be true
with respect to how the guaranty fund will administer Blithe's policies? - ANSWER For
those policies that are terminated, the state will provide for a refund of unearned
premiums to current policyholders.
Which of the following would include loss ratios, expense ratios and combined ratios? -
ANSWER Financial controls
Which of the following is a correct statement about the use of a treaty and facultative
reinsurance? - ANSWER Most treaties require that all loss exposures within the
treaty's terms be reinsured.
The risk control service of physical survey is comprised of - ANSWER Gathering
underwriting information on a customer's loss exposures.
Routine regulation of the insurance business is conducted by state insurance
departments. State insurance departments come under which of the following branches
of government? - ANSWER Executive
Which of the following is the principal business purpose of a professional reinsurer? -
ANSWER To provide a source for the reinsurance needs of insurers
The loss ratio - ANSWER incurred losses including LAE / earned premiums
Brookgreen Insurance has a 40 percent quota share treaty with Cypress Reinsurance.
Policy A has a limit of $50,000, a premium of $2,000, and incurs a $5,000 loss. Because
of the quota share agreement, how much of the premium will go to Cypress
,Reinsurance? ANSWER Cypress Reinsurance will get $2,000 times 40 percent or $800
of the premium.
Readability legislation has changed how commercial and personal policies are written.
On the contrary, readability tests do not really measure - ANSWER How well the
policies can be understood.
Greatview Insurance wishes to improve the process of processing property claims. The
claims department has decided to examine the various activities in the property claim
handling process, from the time it is first reported until the final step when the payment
is made. Which one of the following types of organizational strategies does this
represent? - ANSWER Operational-level strategy
Which of the following ratemaking data development process steps would an insurer
review which areas in a state deserve higher or lower rates? - ANSWER Determine
territorial and class relativities
The major actuarial functions for an insurer include estimation of unpaid liabilities and
adequacy of loss reserves as well as - ANSWER Ratemaking.
Which of the following statements is TRUE about the users of claim information?
ANSWER The producers must have the policyholder loss information in order to
appropriately prepare renewal policies.
In adjusting a property loss, a claim representative must first determine whether or not
the loss was caused by a covered peril. Insurance that covers every cause of direct
physical loss or damage that is not specifically excluded is known as - ANSWER
Special form coverage.
A safety management program is developed based upon a - ANSWER Thorough
analysis of the policyholder's operation.
The major components of an insurer's bulk, or aggregate, loss reserves are reserves for
unreported claims plus - ANSWER Reserves for losses that have inadequate case
,reserves and reserves for claims that have settled and then reopened.
Which of the following is a claim control used to help meet regulatory compliance? -
ANSWER Access security
Which of the following statements is CORRECT regarding the use of treaty and
facultative reinsurance? - ANSWER Most treaties require that all loss exposures within
the terms of the treaty be reinsured.
Financial controls include assessing the company's stock price or - ANSWER using
return on investment for evaluating specific projects.
With respect to underwriting, it is an unfair trade practice to - ANSWER Unfairly
discriminate when selecting loss exposures.
The marketing department of an insurer is interacting with the underwriting department
to identify what characteristics of middle market businesses produce the most
profitable commercial insurance accounts. Which of the following would be the best way
to identify those characteristics? - ANSWER Predictive analytics
After data have been collected and adjusted, and after any territorial and class
relativities have been determined, rate filings must be prepared. Which one of the
following statements is true regarding rate filings? - ANSWER If an advisory
organization files rates or loss costs on behalf of an insurer, it also handles any
follow-up or negotiations.
Which of the following is a possible way in which a premium auditor can contribute to
the risk control function? - ANSWER. By providing information about unsafe
procedures or working conditions
Under a per occurrence excess of loss treaty, the attachment point and the reinsurance
limit apply to - ANSWER The total losses arising from a single event affecting one or
more policies.
, ABC Insurance Company has a 20% quota share treaty with XYZ Reinsurer. One of
ABC's policies has a limit of $1 million and premium of $8,000. A $50,000 loss is
submitted under the policy. How much of the loss will XYZ Reinsurer pay? ANSWER
XYZ Reinsurer will pay $50,000 × 20%, or $10,000 of the loss.
For which one of the following types of insurance would the judgment method of
ratemaking most likely be used? - ANSWER Terrorism coverage
A number of unique factors shape the insurance marketplace. Which one of the
following factors is most likely to lead to insurer insolvency, withdrawal from certain
geographic markets, and reinsurance shortages? - ANSWER Unanticipated
catastrophic losses
Gem- insurance Company wishes to purchase reinsurance for the professional liability
insurance it will write in the coming year. Which of the following statements is true with
respect to the following sources of reinsurance? - ANSWER Reinsurance pools may
sell reinsurance to insurers that are not members of the pool.
One of the functions of reinsurance is to increase large-line capacity. Which one of the
following best describes this function from the perspective of a primary insurer? -
ANSWER to assume a loss exposure with potential financial consequences that are
higher than its financial condition would otherwise permit
What are the two types of pro-rata treaty reinsurance? - ANSWER Quota share -
Insurer and reinsurer used a fixed percentage in sharing the amounts of premiums and
losses.
Surplus share - When a loss exceeds the primary insurers amount, the reinsurer
assumes the remaining amount of the loss.
What are the three types of Excess of Loss Reinsurance? - ANSWER Per Risk, Per
Occurrence, and Aggregate Excess
ACCURATE!!
Blithe Insurance Company was found to be insolvent following the hurricane and the
guaranty fund took over for the state. Which one of the following is most likely to be true
with respect to how the guaranty fund will administer Blithe's policies? - ANSWER For
those policies that are terminated, the state will provide for a refund of unearned
premiums to current policyholders.
Which of the following would include loss ratios, expense ratios and combined ratios? -
ANSWER Financial controls
Which of the following is a correct statement about the use of a treaty and facultative
reinsurance? - ANSWER Most treaties require that all loss exposures within the
treaty's terms be reinsured.
The risk control service of physical survey is comprised of - ANSWER Gathering
underwriting information on a customer's loss exposures.
Routine regulation of the insurance business is conducted by state insurance
departments. State insurance departments come under which of the following branches
of government? - ANSWER Executive
Which of the following is the principal business purpose of a professional reinsurer? -
ANSWER To provide a source for the reinsurance needs of insurers
The loss ratio - ANSWER incurred losses including LAE / earned premiums
Brookgreen Insurance has a 40 percent quota share treaty with Cypress Reinsurance.
Policy A has a limit of $50,000, a premium of $2,000, and incurs a $5,000 loss. Because
of the quota share agreement, how much of the premium will go to Cypress
,Reinsurance? ANSWER Cypress Reinsurance will get $2,000 times 40 percent or $800
of the premium.
Readability legislation has changed how commercial and personal policies are written.
On the contrary, readability tests do not really measure - ANSWER How well the
policies can be understood.
Greatview Insurance wishes to improve the process of processing property claims. The
claims department has decided to examine the various activities in the property claim
handling process, from the time it is first reported until the final step when the payment
is made. Which one of the following types of organizational strategies does this
represent? - ANSWER Operational-level strategy
Which of the following ratemaking data development process steps would an insurer
review which areas in a state deserve higher or lower rates? - ANSWER Determine
territorial and class relativities
The major actuarial functions for an insurer include estimation of unpaid liabilities and
adequacy of loss reserves as well as - ANSWER Ratemaking.
Which of the following statements is TRUE about the users of claim information?
ANSWER The producers must have the policyholder loss information in order to
appropriately prepare renewal policies.
In adjusting a property loss, a claim representative must first determine whether or not
the loss was caused by a covered peril. Insurance that covers every cause of direct
physical loss or damage that is not specifically excluded is known as - ANSWER
Special form coverage.
A safety management program is developed based upon a - ANSWER Thorough
analysis of the policyholder's operation.
The major components of an insurer's bulk, or aggregate, loss reserves are reserves for
unreported claims plus - ANSWER Reserves for losses that have inadequate case
,reserves and reserves for claims that have settled and then reopened.
Which of the following is a claim control used to help meet regulatory compliance? -
ANSWER Access security
Which of the following statements is CORRECT regarding the use of treaty and
facultative reinsurance? - ANSWER Most treaties require that all loss exposures within
the terms of the treaty be reinsured.
Financial controls include assessing the company's stock price or - ANSWER using
return on investment for evaluating specific projects.
With respect to underwriting, it is an unfair trade practice to - ANSWER Unfairly
discriminate when selecting loss exposures.
The marketing department of an insurer is interacting with the underwriting department
to identify what characteristics of middle market businesses produce the most
profitable commercial insurance accounts. Which of the following would be the best way
to identify those characteristics? - ANSWER Predictive analytics
After data have been collected and adjusted, and after any territorial and class
relativities have been determined, rate filings must be prepared. Which one of the
following statements is true regarding rate filings? - ANSWER If an advisory
organization files rates or loss costs on behalf of an insurer, it also handles any
follow-up or negotiations.
Which of the following is a possible way in which a premium auditor can contribute to
the risk control function? - ANSWER. By providing information about unsafe
procedures or working conditions
Under a per occurrence excess of loss treaty, the attachment point and the reinsurance
limit apply to - ANSWER The total losses arising from a single event affecting one or
more policies.
, ABC Insurance Company has a 20% quota share treaty with XYZ Reinsurer. One of
ABC's policies has a limit of $1 million and premium of $8,000. A $50,000 loss is
submitted under the policy. How much of the loss will XYZ Reinsurer pay? ANSWER
XYZ Reinsurer will pay $50,000 × 20%, or $10,000 of the loss.
For which one of the following types of insurance would the judgment method of
ratemaking most likely be used? - ANSWER Terrorism coverage
A number of unique factors shape the insurance marketplace. Which one of the
following factors is most likely to lead to insurer insolvency, withdrawal from certain
geographic markets, and reinsurance shortages? - ANSWER Unanticipated
catastrophic losses
Gem- insurance Company wishes to purchase reinsurance for the professional liability
insurance it will write in the coming year. Which of the following statements is true with
respect to the following sources of reinsurance? - ANSWER Reinsurance pools may
sell reinsurance to insurers that are not members of the pool.
One of the functions of reinsurance is to increase large-line capacity. Which one of the
following best describes this function from the perspective of a primary insurer? -
ANSWER to assume a loss exposure with potential financial consequences that are
higher than its financial condition would otherwise permit
What are the two types of pro-rata treaty reinsurance? - ANSWER Quota share -
Insurer and reinsurer used a fixed percentage in sharing the amounts of premiums and
losses.
Surplus share - When a loss exceeds the primary insurers amount, the reinsurer
assumes the remaining amount of the loss.
What are the three types of Excess of Loss Reinsurance? - ANSWER Per Risk, Per
Occurrence, and Aggregate Excess
