ASLI 320 QUESTIONS WITH VERIFIED ANSWERS
The insurer's rights to recover and sell or otherwise dispose of insured property on which
the insurer has paid a total loss are called - Answers - a. Fiduciary rights.
b. Constructive rights.
c. Catastrophe rights.
D. Salvage rights.
Profit cycles in manufacturing and retailing tend to be - Answers - A. Demand driven.
b. Inelastic.
c. Like the insurance cycle.
d. Shielded from supply shock.
Which one of the following statements concerning claim status reports is true? - Answers -
a. Claim status reports are not vital to an insurer because the reports are usually read only
by insurance department employees.
b. Claim status reports are not vital to an insurer because the reports are used only as a
method of illustrating work that needs to be done by the claims adjuster.
c. Claim status reports are vital to an insurer because the reports provide work for the
claim representatives, rounding out their written and verbal skills.
D. Claim status reports are vital to an insurer because the reports advise the insurer how
the claim is progressing on a periodic basis.
Underwriting management arranges treaty reinsurance to reinsure - Answers - A. A group
or portfolio of insureds.
b. Insureds that do not meet underwriting guidelines.
c. All insurance of the primary insurer.
d. Individual accounts.
As surplus lines intermediaries, Lloyd's brokers have particular capabilities to perform their
market function. Which one of the following describes one of these capabilities? - Answers
- a. Marketing programs for a broad range of specialized and unique risks
b. Niche marketing expertise to gain a competitive advantage
C. Knowing which syndicates and underwriters have expertise in the class of business for
which they are seeking coverage
d. Having reinsurance available for the accounts they broker
Stable Insurance Group, a surplus lines insurer, is considering granting binding authority
to a managing general agent (MGA). In deciding whether to grant binding authority to an
MGA, a surplus lines insurer will assess several factors. Which one of the following
statements is correct with respect to an MGA's financial condition? - Answers - a. Surplus
lines insurers typically require MGAs to remit premiums as soon as they are collected
rather than holding them and remitting them at a later time.
b. An insurer generally seeks the same types of financial guarantees from all MGAs with
which it contracts.
C. The MGA's financial condition is important because the insurer assumes a credit risk
when extending binding authority and responsibility for policy issuance.
d. Credit risk increases when the surplus lines MGA remits premiums to the insurer based
on its own booking records rather than those of the insurer.
Which one of the following statements is correct with respect to increased limits above the
, basic coverage limits? - Answers - a. Because increased limits losses are typically well
documented, they provide excellent data credibility.
B. Charges to increase commercial liability insurance limits frequently exceed 100 percent
of the charge for basic coverage limits.
c. Loss severity typically increases uniformly with increased coverage limits.
d. Higher limits can require a portion of the coverage to be reinsured, which reduces the
insurer's risk and hence the premium charged for the coverage.
Liabilities are claims against the organization's assets. Which one of the following best
describes a current liability? - Answers - a. Deferred acquisition costs
B. Unpaid invoices from vendors
c. Treasury stock to be retired in six months
d. Unamortized portion of goodwill
Violet Insurance Company has a surplus share treaty with White Reinsurer and retains a
line of $50,000. The treaty contains five lines and provides for a maximum cession of
$250,000. Violet Insurance issues a policy insuring a building for $150,000 for a premium
of $1,900 with one loss of $60,000. What percentage of insurance, premiums, and losses
is ceded to White Reinsurer? - Answers - a. 33.33%
b. 50%
C. 66.67%
d. 100%
Which one of the following best describes what is determined by the insurer's staff review
of applications from prospective insureds? - Answers - a. Whether any loss control
recommendations will be made
b. Whether the account should be written as a personal insurance policy or a commercial
insurance policy
c. Whether claims will be paid or denied
D. Whether the characteristics of the customer match the insurer's eligibility and selection
criteria
Which one of the following is most important in developing and maintaining a successful
surplus lines insurance program? - Answers - a. Familiarity with Insurance Services
Office, Inc. rate classifications
b. An aggressive pricing strategy
C. Extensive research and familiarity with the insured's business
d. General underwriting expertise rather than narrow specialization
Which one of the following financial ratios indicates the extent to which a company is
financed using borrowed funds rather than its own funds? - Answers - a. Current ratio
B. Debt-to-equity ratio
c. Total debt to total assets ratio
d. Return on assets ratio
Clash coverage limits should be set by considering all of the following, EXCEPT: -
Answers - A. Catastrophe excess of loss reinsurance purchased by the primary insurer
b. Policy limits offered by the primary insurer
c. Potential for excess of policy limits losses
d. Potential for multiple primary policies to be involved in a single occurrence
As part of financial planning, an intermediary can analyze the composition, account
stratification and size, and underwriting results of its book of business. Which one of the
following statements is correct with respect to the composition of a book of business? -
The insurer's rights to recover and sell or otherwise dispose of insured property on which
the insurer has paid a total loss are called - Answers - a. Fiduciary rights.
b. Constructive rights.
c. Catastrophe rights.
D. Salvage rights.
Profit cycles in manufacturing and retailing tend to be - Answers - A. Demand driven.
b. Inelastic.
c. Like the insurance cycle.
d. Shielded from supply shock.
Which one of the following statements concerning claim status reports is true? - Answers -
a. Claim status reports are not vital to an insurer because the reports are usually read only
by insurance department employees.
b. Claim status reports are not vital to an insurer because the reports are used only as a
method of illustrating work that needs to be done by the claims adjuster.
c. Claim status reports are vital to an insurer because the reports provide work for the
claim representatives, rounding out their written and verbal skills.
D. Claim status reports are vital to an insurer because the reports advise the insurer how
the claim is progressing on a periodic basis.
Underwriting management arranges treaty reinsurance to reinsure - Answers - A. A group
or portfolio of insureds.
b. Insureds that do not meet underwriting guidelines.
c. All insurance of the primary insurer.
d. Individual accounts.
As surplus lines intermediaries, Lloyd's brokers have particular capabilities to perform their
market function. Which one of the following describes one of these capabilities? - Answers
- a. Marketing programs for a broad range of specialized and unique risks
b. Niche marketing expertise to gain a competitive advantage
C. Knowing which syndicates and underwriters have expertise in the class of business for
which they are seeking coverage
d. Having reinsurance available for the accounts they broker
Stable Insurance Group, a surplus lines insurer, is considering granting binding authority
to a managing general agent (MGA). In deciding whether to grant binding authority to an
MGA, a surplus lines insurer will assess several factors. Which one of the following
statements is correct with respect to an MGA's financial condition? - Answers - a. Surplus
lines insurers typically require MGAs to remit premiums as soon as they are collected
rather than holding them and remitting them at a later time.
b. An insurer generally seeks the same types of financial guarantees from all MGAs with
which it contracts.
C. The MGA's financial condition is important because the insurer assumes a credit risk
when extending binding authority and responsibility for policy issuance.
d. Credit risk increases when the surplus lines MGA remits premiums to the insurer based
on its own booking records rather than those of the insurer.
Which one of the following statements is correct with respect to increased limits above the
, basic coverage limits? - Answers - a. Because increased limits losses are typically well
documented, they provide excellent data credibility.
B. Charges to increase commercial liability insurance limits frequently exceed 100 percent
of the charge for basic coverage limits.
c. Loss severity typically increases uniformly with increased coverage limits.
d. Higher limits can require a portion of the coverage to be reinsured, which reduces the
insurer's risk and hence the premium charged for the coverage.
Liabilities are claims against the organization's assets. Which one of the following best
describes a current liability? - Answers - a. Deferred acquisition costs
B. Unpaid invoices from vendors
c. Treasury stock to be retired in six months
d. Unamortized portion of goodwill
Violet Insurance Company has a surplus share treaty with White Reinsurer and retains a
line of $50,000. The treaty contains five lines and provides for a maximum cession of
$250,000. Violet Insurance issues a policy insuring a building for $150,000 for a premium
of $1,900 with one loss of $60,000. What percentage of insurance, premiums, and losses
is ceded to White Reinsurer? - Answers - a. 33.33%
b. 50%
C. 66.67%
d. 100%
Which one of the following best describes what is determined by the insurer's staff review
of applications from prospective insureds? - Answers - a. Whether any loss control
recommendations will be made
b. Whether the account should be written as a personal insurance policy or a commercial
insurance policy
c. Whether claims will be paid or denied
D. Whether the characteristics of the customer match the insurer's eligibility and selection
criteria
Which one of the following is most important in developing and maintaining a successful
surplus lines insurance program? - Answers - a. Familiarity with Insurance Services
Office, Inc. rate classifications
b. An aggressive pricing strategy
C. Extensive research and familiarity with the insured's business
d. General underwriting expertise rather than narrow specialization
Which one of the following financial ratios indicates the extent to which a company is
financed using borrowed funds rather than its own funds? - Answers - a. Current ratio
B. Debt-to-equity ratio
c. Total debt to total assets ratio
d. Return on assets ratio
Clash coverage limits should be set by considering all of the following, EXCEPT: -
Answers - A. Catastrophe excess of loss reinsurance purchased by the primary insurer
b. Policy limits offered by the primary insurer
c. Potential for excess of policy limits losses
d. Potential for multiple primary policies to be involved in a single occurrence
As part of financial planning, an intermediary can analyze the composition, account
stratification and size, and underwriting results of its book of business. Which one of the
following statements is correct with respect to the composition of a book of business? -
