Michigan Surplus Lines Insurance Exam

(1)Surplus Lines premiums typically expand during: A) A soft Market B) A Hard Market - Correct Ans-A Hard Market. Surplus lines premiums typically expand during a hard market. (2) During the time of a hard market, insurers will: A) Tighten their underwriting standards B) Loosen their underwriting standards - Correct Ans-A) Tighten their underwriting standards. Tighten and raise premiums. (3) A Ceding company (Choose all that apply): A) Is a primary insurer B) Is also a reinsurer C) Is always also a captive company D) Passes on to other insurers some part of its risk under insurance policies it has accepted E) Will not be held liable to pay the claims in the event of default by the reinsurer. - Correct Ans-A) Is primary Insurer D) Passes on to other insurers some of its risk under insurance policies it has accepted (4) An insurers appetite to write business is often measured by: A) Its risk class B) Its status C) Its financial strength D)Its premium to surplus ratio - Correct Ans-D) Its premium to surplus ratio (5) A surplus lines insurer: A) Has to be licensed and admitted in the same state as the broker B) Is not always licensed or admitted in the same state as the broker - Correct Ans-B) Is not always licensed or admitted in the same state as the broker (6) Karl the fortune teller believes that the world is full of uncertainty, and so is his destiny. He often engages himself in extreme sports activities for fun and for challenge. He thinks he will need more insurance coverage in the future. He prefers a surplus line policy. A) This is a good idea B) This is probably not a good idea - Correct Ans-B) This is probably not a good idea MICHIGAN MICHIGAN Surplus lines is for hard to place risk. nothing about this is really hard to place, and he should maybe just buy more life insurance. (7) A domestic surplus lines company must be licensed in at least one state or other US jurisdiction. True or False - Correct Ans-True (8) When a surplus lines insurance for coverage in this state is not placed through a licensed surplus lines agent here, A) The transaction is a foreign transaction that is still technically lawful B) The transaction would still qualify as the lawful transaction of surplus lines insurance C) The transaction would not qualify as the lawful transaction of surplus lines insurance - Correct Ans-C) The transaction would not qualify as the lawful transaction of surplus lines insurance (9) The Terrorism Risk Insurance Act (TRIA): A) Applies to surplus lines policies B) Does not apply to surplus lines policies - Correct Ans-A) Applies to surplus lines policies. (10) A surplus lines policy: A) Is still covered by the state guaranty fund when placed locally B) Is covered by the state guaranty fund as long as it is placed via a licensed broker or agent. C) Is not covered by the state guaranty fund - Correct Ans-C) Is not covered by the state guaranty fund (11) For surplus lines insurers, the relative freedom from form and rate regulation give: A)Flexibility B) Legal Waiver C) Cost Advantage D) The right of non-disclosure - Correct Ans-A) Flexibility (12) In the context of insurance, losses depend primarily on which two variables: A) The background B) The number of losses C) The amount involved D) The nature of events E) The policy - Correct Ans-B) The number of losses C) The amount involved (13) Who must verify the financial strength and viability of a nonadmitted insurer? A) The insurance commission B) The department of commerce C) The surplus line broker/agent MICHIGAN MICHIGAN D) The guarantee association of the state - Correct Ans-C) The surplus line broker/agent (14) Which of these imposes a set of national eligibility standards for surplus lines insurers domiciled in any US jurisdiction? A) NRCA B) NRTT C) NRAS D) NRRA - Correct Ans-D) NRRA (National Risk Retention Association) (15) In Michigan, a surplus lines producer must report surplus lines or non admitted insurance business written for a Michigan risk on what basis? A) Monthly B) Quarterly C) Semi-Annually D) Annually - Correct Ans-C) Semi-Annually (16) Which of these can be used to determine success between an underwriter and an agent? A) Hit Ratio B) Spot Ratio C) Transfer Ratio D) Smart Ratio E) None of These - Correct Ans-A) Hit Ratio (17) In many insurance policies, losses will be reimbursed only in excess of a threshold known as: A)A Baseline B) A Deductible C) A Bottom-line D) A trigger - Correct Ans-B) A Deductible (18) A benefit limit serves as: A) A lower bond on how much the insurer will pay for the loss B) An upper bound on how much the insurer will pay for the loss C) A lower bound on the loss D) AN upper bound on the loss - Correct Ans-B) An upper bound on how much the insurer will pay for the loss (19) When there is inflation: A) The claim payments will increase accordingly B) The claim payments will decrease accordingly C) The claim payments will always remain the same D) The policy will be voided - Correct Ans-A) The claim payments will increase accordingly MICHIGAN MICHIGAN (20) What refers to the probability distribution that is associated with either the loss or the amount paid as a result of the loss? A) Claim distribution B) Income Distribution C) Loss Distribution D) Risk Distribution - Correct Ans-C) Loss Distribution (21) What describe the provisions for future liabilities?