CPCU 520 Exam 2025.Verified Latest
Review with Complete Test and 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? - CORRECT ANS>>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? - CORRECT ANS>>Most treaties require that all loss exposures within the
treaty's terms be reinsured.
The risk control service of physical survey is comprised of - CORRECT ANS>>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? -
CORRECT ANS>>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 - CORRECT ANS>>incurred losses including LAE / earned premiums
Brook green 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 - CORRECT ANS>>How well the policies
can be understood.
Great view 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? -
CORRECT ANS>>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 - CORRECT ANS>>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 - CORRECT ANS>>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 - CORRECT ANS>>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? - CORRECT ANS>>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 - CORRECT ANS>>using
return on investment for evaluating specific projects.
With respect to underwriting, it is an unfair trade practice to - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>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 - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>Per Risk, Per
Occurrence, and Aggregate Excess
Review with Complete Test and 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? - CORRECT ANS>>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? - CORRECT ANS>>Most treaties require that all loss exposures within the
treaty's terms be reinsured.
The risk control service of physical survey is comprised of - CORRECT ANS>>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? -
CORRECT ANS>>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 - CORRECT ANS>>incurred losses including LAE / earned premiums
Brook green 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 - CORRECT ANS>>How well the policies
can be understood.
Great view 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? -
CORRECT ANS>>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 - CORRECT ANS>>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 - CORRECT ANS>>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 - CORRECT ANS>>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? - CORRECT ANS>>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 - CORRECT ANS>>using
return on investment for evaluating specific projects.
With respect to underwriting, it is an unfair trade practice to - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>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 - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>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? - CORRECT ANS>>Per Risk, Per
Occurrence, and Aggregate Excess
